CENTRAL ELECTRICITY REGULATORY COMMISSION

NEW DELHI

Petition No. 408/GT/2020

Coram:
Shri P.K. Pujari, Chairperson
Shri I.S. Jha, Member
Shri Arun Goyal, Member

Date of Order: 8th January, 2022

In the matter of
Petition for truing-up of tariff for the 2014-19 Tariff Period and for determination of
tariff for the 2019-24 Tariff Period in respect of Maithon Right Bank Thermal Power
Project (1050 MW) of Maithon Power Limited.

And

In the matter of

Maithon Power Limited,

Jeevan Bharti, 10th Floor, Tower-I,
124, Connaught Circus,
New Delhi-110001 …..Petitioner
Vs
1. Tata Power Delhi Distribution Limited,
33 kV Sub-station, Kingsway Camp,
Delhi –110 009
2. Damodar Valley Corporation,
DVC Towers, VIP Road,
Kolkata-700 054

3. Kerala State Electricity Board Limited,

Vidyuthi Bhawan, Pattom,
Thiruvananthapuram – 695 004

4. West Bengal State Electricity Distribution Company Limited,

Bidyut Bhawan (8th Floor), Block-DJ, Sector-II, Salt Lake,
Kolkata-700 091
5. Tata Power Trading Company Limited,
Corporate Centre, 'A' Block,
34, Sant Tukaram Road, Carnac Bunder,
Mumbai 400 006 ….Respondents

Order in Petition No. 408/GT/2020 Page 1 of 178

Parties present:
Shri Venkatesh, Advocate, MPL
Ms. Nishtha Kumar, Advocate, MPL
Shri Pankaj Prakash, MPL

ORDER

The Petitioner, Maithon Power Ltd (in short ‘MPL’) is a public limited company

incorporated on 26.7.2000 under the provisions of the Companies Act, 1956. MPL is

a joint venture between Tata Power Trading Company Ltd. (TPTCL) with an equity

participation of 74% and Damodar Valley Corporation (DVC) with an equity

participation of the remaining 26%. Maithon Right Bank Power Project (1050 MW)

(hereinafter referred to as ‘the generating station’) of the Petitioner is situated in the

Dhanbad District of the State of Jharkhand and is envisaged as a Mega Power

Project in terms of the Ministry of Finance, Govt. of India Notification No. 63/99 dated

13.5.1999 and Notification no.100/99-Customs dated 28.7.1999. The actual date of

commercial operation (COD) of Unit-I of the generating station is 1.9.2011 and the

COD of Unit-II/generating station is 24.7.2012.

Background

2. Petition No. 274/2010 was filed by the Petitioner for determination of tariff of

the generating station from COD of Unit-I (1.9.2011) and Unit-II (24.7.2012) till

31.3.2014 and the Commission vide its order dated 19.11.2014 determined the tariff

for the said period, based on the capital cost of Rs.244839 lakh (as on 1.9.2011) and

Rs.137002 lakh (as on 24.7.2012). Against this order dated 19.11.2014, the

Petitioner filed Appeal No. 48/2015 before the Appellate Tribunal for Electricity

(APTEL) and the same was disposed of by judgment dated 10.5.2016. Against this

judgment, the Petitioner filed Review Petition (RP No. 16/2016) before APTEL and

by order dated 10.10.2017, the APTEL upheld its judgment dated 10.5.2016 in

Order in Petition No. 408/GT/2020 Page 2 of 178

Appeal No.48/2015. During the pendency of the said appeal, Petition No.

152/GT/2015 was filed by the Petitioner for truing-up of tariff for the 2009-14 tariff

period and for determination of tariff of the generating station for the 2014-19 tariff

period. Meanwhile, Petition No. 72/MP/2016 was also filed by the Petitioner seeking

in-principle approval of the “Abstract Schemes” of capital expenditure in compliance

with Environment (Protection) Amendment Rules, 2015 issued by the Ministry of

Environment, Forest and Climate Change (in short ‘MOEF & CC’) dated 7.12.2015

and the Commission vide its order dated 20.3.2017 in Petition No. 72/MP/2016

disposed of the same as under:

“10. Since, the 2014 Tariff Regulations do not provide for the grant of in-principle
approval for the capital expenditure, the prayer of the petitioner for in-principle approval
of the Abstract scheme of capital expenditure by relaxing the provisions of the tariff
regulations through invoking Regulation 54 of 2014 Tariff Regulations, is not
maintainable. In our view, since, the implementation of new norms in the existing and
under construction thermal generating stations would require modification of their
existing system and installation of new systems such as Retro-fitting of additional fields
in ESP/replacement of ESP, etc. to meet Suspended Particulate Matter norms,
installation of FGD system to control SOx and Selective Catalytic Reduction (SCR)
systems for DeNox, the petitioner is directed to approach the Central Electricity
Authority to decide specific optimum technology, associated cost and major issues to
be faced in installation of different system like SCR, etc. The petitioner is also directed
to take up the matter with the Ministry of Environment and Forest for phasing of the
implementation of the different environmental measures. Accordingly, the petitioner is
granted liberty to file appropriate petition at an appropriate stage based on approval of
CEA and direction of MoEF which shall be dealt with in accordance with law.”

3. Subsequently, the Commission by order dated 26.12.2017 in Petition

No.152/GT/2015, trued up the tariff of the generating station for the 2009-14 tariff

period and determined tariff for the 2014-19 tariff period. In the said order, an

amount of Rs.160 crore towards Liquidated Damages (LD) was deducted from the

capital cost, till such time the Petitioner furnished details of LD settlement. Against

this order, the Petitioner filed Review Petition (Petition No.16/RP/2018) on the

following issues:

“a) Disallowance of 1% of additional interest rate for computing the Interest During
Construction and Interest on Loan for the period 2011-14 to recover fully the
interest cost with actual weighted average;

Order in Petition No. 408/GT/2020 Page 3 of 178

 b) Weighted average depreciation rate for the entire generating station as shown in
Form-11 and accordingly, revise the depreciation on the fixed assets for the
period 2014 -19 and grant consequential relief;
c) Billing as ‘on received’ basis at unloading point through hydraulic augur or
manually;
d) Allow ash disposal expenses for the period 2014-19; and
e) Non-consideration of reimbursement of refinancing cost and financing charges.”

4. Thereafter, the Commission vide its order dated 25.4.2019, disposed of the

review petition (Petition No.16/RP/2018) rejecting the prayer (a) above, while

allowing the other prayers (b) to (e) above. However, while allowing prayers (b) and

(d), the Commission in the said order dated 25.4.2019 observed that these issues

would be considered at the time of truing-up of tariff for the 2014-19 tariff period.

Subsequently, by corrigendum order dated 25.4.2019, certain clerical errors in

Commission’s order dated 25.4.2019 in Petition No.16/RP/2018 were corrected.

Against the Commission’s order dated 25.4.2019 in Petition No.16/RP/2018, the

Petitioner has filed appeal (Appeal No. 405/2019) before APTEL and the same is

pending.

5. The Petitioner had also filed Petition No. 285/MP/2018 for inclusion of LD

amount of Rs.160 crore deducted from the capital cost (in terms of Commission’s

order dated 26.12.2017 in Petition No. 152/GT/2015) and for re-computation of tariff

for the tariff periods 2009-14 and 2014-19 and the Commission by order dated

17.7.2019 disposed of the same, as under:

“22. In view of the above, the total expected LD amount of `160 crore which was
deducted from the capital cost vide Commission’s order dated 26.12.2017 in Petition
No. 152/GT/2015 is allowed to be included in the capital cost of the generating station.
Consequently, the impact due to inclusion of the said LD amount in the capital cost
shall be worked out and tariff of the generating station for the period 2011-14 and
2014-19 shall be revised by a separate order in Petition No. 152/GT/2015. We decide
accordingly”

Order in Petition No. 408/GT/2020 Page 4 of 178

6. In terms of the above order, the Commission vide its order dated 1.10.2019 in

Petition No.152/GT/2015, revised the annual fixed charges of the generating station

for the 2009-14 and 2014-19 tariff periods, as under:

For the 2009-14 tariff period

(Rs. in lakh)
1.9.2011 to 1.4.2012 to 24.7.2012 to 1.4.2013 to
31.3.2012 23.7.2012 31.3.2013 31.3.2014
Return on Equity 6638.57 3562.77 12522.21 24504.50
Interest on Loan 11406.46 6432.76 22039.39 32976.10
Depreciation 7410.76 3977.19 14071.72 21765.36
Interest on 2551.51 1380.28 5848.12 8757.88
Working Capital
O&M Expenses 4439.39 2518.62 11090.76 17052.00
Cost of secondary 1213.41 651.21 2641.17 3840.74
fuel oil
Total 33660.10 18522.83 68213.37 108896.58

For the 2014-19 tariff period

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Return on Equity 26206.98 27372.03 27641.49 27641.49 27641.49
Interest on Loan 30577.17 29802.87 27474.08 24608.99 21340.09
Depreciation 16024.29 21522.66 23943.11 24142.40 30720.24
Interest on Working 8599.88 8809.52 8879.48 9032.77 9187.93
Capital
O&M Expenses 17746.18 18807.18 19930.18 21127.18 22398.18
Total 99154.50 106314.26 107868.34 106552.83 111287.93

7. Thereafter, the Petitioner, based on the response of CEA and MOEF&CC and

in terms of the liberty granted by the order dated 20.3.2017 in Petition No.

72/MP/2016 (refer paragraph 2 above), filed Petition No.152/MP/2019, seeking

amongst others, a declaration that the MOEF&CC Notification dated 7.12.2015 and

its letter dated 11.12.2017 are ‘change in law’ events and also for the grant of ‘in-

principle’ approval of the expenditure towards installation of FGD system for meeting

the revised emission norms of SO2. By order dated 11.11.2019, the Commission

disposed of prayers (a) to (h) in Petition No.152/MP/2019 as extracted below:

“16……..Considering the fact that the expenditure shall be incurred during next tariff
period commencing from 1.4.2019, prayer of the petitioner is to be dealt under the
provisions of 2019, Tariff Regulations pertaining to additional capital expenditure. As per

Order in Petition No. 408/GT/2020 Page 5 of 178

 Regulation 29 of 2019, Tariff Regulations, the additional capital expenditure to be
incurred on account of revised emission standards has been recognized separately. In
light of the above explicit Regulation pertaining to the additional capital expenditure on
new environment standards, it is not required to invoke the provision of Change in Law
as per the 2019, Tariff Regulations. Accordingly, prayer (b) of the petitioner disposed in
terms of above
..The petitioner has already informed the beneficiaries about the estimated expenditure
which exceeds the limit of Rs.100 crore specified under the Regulation. As such, the
proposed expenditure on FGD is squarely covered within the Regulation 11 of the 2019
Tariff Regulations. Accordingly, it is held that proposed expenditure qualifies for the In-
principle approval, subject to further scrutiny of the proposed expenditure

29. In view of the above, the Commission accords In-principle approval to the petitioner
for following cost:
xxx
The Commission allows the petitioner to claim IDC, IEDC, Taxes and opportunity cost at
actuals which may be allowed after prudence check in accordance with the 2019, Tariff
Regulations.
30. Accordingly, prayer (c) and (d) of the petitioner are disposed in terms of above
35. The norms for additional O&M expenses would be finalized by CERC. Accordingly,
the claim of the petitioner for allowing O&M expenditure is not being considered at this
stage. We direct the petitioner to submit the O&M expenses relating to FGD system on
actual basis at the time of filling the petition for determination of tariff on commissioning
of the FGD system.
38. As regards the exclusion of the shutdown period for calculation of availability for
recovery of fixed charges, Commission has already taken a view that the generator in
consultation with beneficiaries would plan to synchronize the interconnection of FGD
with the annual overhaul so as to minimize the additional downtime required for FGD
interconnection. Accordingly, Petitioner is directed to schedule the shutdown period
prudently to avoid the impact on availability. However, if shutdown period for FGD
integration exceeds the period of annual overhauling, the petitioner has liberty to claim
the same at the time of tariff determination. Accordingly, prayer (e) and (f) of the
petitioner is disposed in terms of above.
xxx
40. As per Clause (2) of the Regulation 14 of the 2019 Tariff Regulations, the
Commission has already specified the regulatory framework for determination of
supplementary tariff inter-alia provides supplementary capacity charges and
supplementary energy charges. This regulation is effective for 2019-24 tariff period. The
Commission will determine this supplementary tariff on submission of application by the
petitioner after installation of FGD. As such, state/beneficiaries may decide merit order
dispatch while scheduling the plants. Accordingly, prayer (g) of the petitioner is
disposed in terms of above.
41…………..Further, in Petition no. 92/MP/2015 dated 08.03.2019, the Commission has
clarified as under:
“xxxxx

In view of the above, the Petitioner may seek appropriate remedy in case the
Petitioner relinquishes LTA due to additional APC. Accordingly, prayer (h) of the
petitioner is disposed in terms of above.”

Order in Petition No. 408/GT/2020 Page 6 of 178

8. It is noticed that the opening capital cost of Rs.432039.88 lakh claimed by the

Petitioner as on 1.4.2014 is at variance with the capital cost of Rs.432490.69 lakh as

allowed vide order dated 1.10.2019 in Petition No. 152/GT/2015. In this regard, the

Petitioner has clarified as under:

“Capital cost of ₹432490.69 lakh as on 1.4.2014 in order dated 26.12.2017 was

approved based on admitted capital cost of 31.3.2014 in true up of tariff for 2009-14
tariff period. However, while reporting de-capitalization of assets during the 2012-13
and 2013-14 in the true-up of tariff for 2009-14, the Petitioner had inadvertently missed
to exclude small de-capitalizations towards few minor assets. This omission of de-
capitalization is worked out by the Petitioner as ₹450.81 lakh and is corrected in the
opening value of 2014-15 i.e. (₹432490.69 lakh – 450.81 lakh) for the purpose of Tariff
determination.”

9. Admittedly, the capital cost of Rs.432490.69 lakh as on 31.3.2014 (the same

capital cost was considered as opening capital cost as on 1.4.2014 for determination

of tariff for the 2014-19 tariff period), approved vide order dated 1.10.2019 in Petition

No.152/GT2015, is without considering the de-capitalization of certain amounts for

2012-13 and 2013-14, which the Petitioner had failed to furnish at the time of truing

up of tariff for the 2009-14 tariff period. Since the Petitioner, in the present petition,

has submitted that there is de-capitalization of Rs.450.81 lakh for 2012-13 and 2013-

14, the opening capital cost for the 2014-19 period stands revised to Rs.432039.88

lakh as on 31.3.2014, instead of Rs.432490.69 lakh as approved vide order dated

1.10.2019 in Petition No. 152/GT/2015. Here, we would like to point out that even

though tariff for the 2009-14 tariff period has been trued up earlier for the generating

station, the downward revision (on account of decapitalization of Rs. 450.81 lakh) in

the capital cost is allowed, keeping in view the interest of consumers and tariff is

modified accordingly.

Tariff for the 2009-14 tariff period

10. As discussed above, the de-capitalization of Rs.450.81 lakh for 2012-13 and

2013-14 has been allowed and based on the downward revision in capital cost, the

Order in Petition No. 408/GT/2020 Page 7 of 178

annual fixed charges for the period from 1.9.2011 to 31.3.2014 in order dated

1.10.2019 in Petition No.152/GT/2015 stands modified as under:

(Rs. in lakh)
1.9.2011 to 1.4.2012 to 24.7.2012 to 2013-14
31.3.2012 23.7.2012 31.3.2013
Total annual fixed charges 33660.10 18522.83 68213.37 108896.58
allowed in order dated
1.10.2019
Total annual fixed charges 33660.10 18522.83 68199.83 108896.58
allowed in this order

11. The difference between the annual fixed charges recovered by the Petitioner

in terms of the order dated 26.12.2017 read with order dated 1.10.2019 in Petition

No.152/GT/2015 and the annual fixed charges determined by this order shall be

adjusted in terms of Regulation 6(4) of the 2009 Tariff Regulations.

TARIFF FOR THE 2014-19 TARIFF PERIOD (PRESENT PETITION)

12. The present petition has been filed by the Petitioner for truing-up of tariff of

the generating station for the 2014-19 tariff period, in terms of Regulation 8 of the

2014 Tariff Regulations and for determination of tariff of the generating station for the

2019-24 tariff period, in accordance with the provisions of the 2019 Tariff

Regulations. We proceed to examine the claims of the Petitioner in the present

petition as stated in the subsequent paragraphs.

13. The capital cost allowed vide order dated 1.10.2019 in Petition No.

152/GT/2015 for the 2014-19 tariff period is as under:

Capital cost allowed

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Opening Gross Block 432490.69 458448.69 467564.69 467564.69 467564.69
Addition due to 25958.00 9116.00 0.00 0.00 0.00
Projected additional
capitalization
Closing Gross Block 458448.69 467564.69 467564.69 467564.69 467564.69

Order in Petition No. 408/GT/2020 Page 8 of 178

14. The capital cost and the annual fixed charges claimed by the Petitioner for the

2014-19 tariff period are as under:

Capital Cost claimed

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Opening Capital Cost 432039.88 465178.28 480597.95 481368.32 483304.48
Add: Additions during 34679.91 14992.72 1029.48 2213.78 4380.74
the year/ period
Less: De-capitalisation (-) 3214.56 (-) 131.14 (-) 69.61 (-) 132.63 (-) 81.37
during the year/ period
Add: Un-discharged 4980.50 391.10 71.94 179.30 0.00
liability as on 1st April
of each year
Less: Un-discharged 391.10 71.94 179.30 0.00 0.00
liability as on end of
each year
Cash Capitalization (-) 5506.76 0.00 0.00 0.00 0.00
towards land
Add: Normative IDC
on Excess Equity 62.39 199.52 41.00 192.37 429.04
Less: De-
capitalisation not
performed in books 0.00 96.56 192.54 717.48 350.46
Add: Normative IDC
on actual loan 2672.02 485.50 69.39 200.82 230.48
Less: IDC Capitalised 144.00 349.53 0.00 0.00 0.00
in Books excluding
Railways
Total Capitalisation 33138.39 15419.68 770.36 1936.17 4608.43
Closing Capital Cost 465178.28 480597.95 481368.32 483304.48 487912.91

Annual Fixed Charges claimed

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Depreciation 22643.97 23503.18 23832.01 24111.09 24114.97
Interest on Loan 32595.27 31716.69 27954.98 25045.86 21526.68
Return on Equity 26392.44 27955.58 28434.13 28514.13 28783.32
Interest on Working 8599.88 8809.52 8879.48 9032.78 9187.93
Capital
O&M Expenses 17846.53 18932.63 20092.92 21275.50 22443.24
Other O&M expense 6098.44 3791.36 3647.73 3320.87 3340.46
(Ash disposal)
Additional Tax due to 0.00 0.00 49.06 49.06 49.67
Change in law
Total 114176.53 114708.95 112890.30 111349.28 109446.27

15. The Respondent No.3, Kerala State Electricity Board Limited (KSEBL) has

filed its reply vide affidavit dated 17.6.2020 and the Petitioner has filed its rejoinder to

Order in Petition No. 408/GT/2020 Page 9 of 178

the said reply vide affidavit dated 24.7.2020. The matter was heard on 2.6.2020 and

the Commission vide Record of the Proceedings (ROP) directed the Petitioner to

submit certain additional information and reserved its order. In response, the

Petitioner vide affidavit dated 3.7.2020 has filed the additional information and has

served copies of the same on the Respondents. Taking into consideration the

submissions of the parties and the documents available on record, we examine the

claims of the Petitioner for the 2014-19 tariff period, on prudence check, as stated in

the subsequent paragraphs.

Capital Cost

16. Regulation 9(3) of the 2014 Tariff Regulations provides as under:

“9 (3) The Capital cost of an existing project shall include the following:
(a) the capital cost admitted by the Commission prior to 1.4.2014 duly trued up by
excluding liability, if any, as on 1.4.2014;
(b) additional capitalization and de-capitalization for the respective year of tariff as
determined in accordance with Regulation 14; and
(c) expenditure on account of renovation and modernization as admitted by this
Commission in accordance with Regulation 15.”

17. We have, in paragraph 9 of this order, allowed the revision of the capital cost

of the generating station to Rs.432039.88 lakh as on 31.3.2014, after considering the

de-capitalization of certain amounts by the Petitioner for 2012-13 and 2013-14.

Accordingly, in terms of Regulation 9(3)(a) of the 2014 Tariff Regulations, the closing

capital cost of Rs.432039.88 lakh as on 31.3.2014, has been considered as the

opening capital cost as on 1.4.2014.

Additional Capital Expenditure

18. Regulations 14(1) and 14(3) of the 2014 Tariff Regulations provide as under:

“14. Additional capitalization and De-capitalization:

(1) The capital expenditure in respect of the new project or an existing project
incurred or projected to be incurred, on the following counts within the original scope
of work, after the date of commercial operation and up to the cut-off date may be
admitted by the Commission, subject to prudence check:

Order in Petition No. 408/GT/2020 Page 10 of 178

 (i) Un-discharged liabilities recognized to be payable at a future date;
(ii) Works deferred for execution;
(iii) Procurement of initial capital spares within the original scope of work, in
accordance with the provisions of Regulation 13;
(iv) Liabilities to meet award of arbitration or for compliance of the order or decree of
a court of law; and
(v) Change in law or compliance of any existing law:
Provided that the details of works asset wise/work wise included in the original
scope of work along with estimates of expenditure, liabilities recognized to be
payable at a future date and the works deferred for execution shall be submitted
along with the application for determination of tariff
(2) xxxx
(3) The capital expenditure, in respect of existing generating station or the
transmission system including communication system, incurred or projected to be
incurred on the following counts after the cut-off date, may be admitted by the
Commission, subject to prudence check:
(i) Liabilities to meet award of arbitration or for compliance of the order or decree of a
court of law;
(ii) Change in law or compliance of any existing law;
(iii) Any expenses to be incurred on account of need for higher security and safety of
the plant as advised or directed by appropriate Government Agencies of statutory
authorities responsible for national security/internal security;
(iv) Deferred works relating to ash pond or ash handling system in the original scope
of work;
(v) Any liability for works executed prior to the cut-off date, after prudence check of
the details of such un-discharged liability, total estimated cost of package, reasons
for such withholding of payment and release of such payments etc.;
(vi) Any liability for works admitted by the Commission after the cut-off date to the
extent of discharge of such liabilities by actual payments;
(vii) Any additional capital expenditure which has become necessary for efficient
operation of generating station other than coal/lignite based stations or transmission
system as the case may be. The claim shall be substantiated with the technical
justification duly supported by the documentary evidence like test results carried out
by an independent agency in case of deterioration of assets, report of an
independent agency in case of damage caused by natural calamities, obsolescence
of technology, up-gradation of capacity for the technical reason such as increase in
fault level;
(viii) In case of hydro generating stations, any expenditure which has become
necessary on account of damage caused by natural calamities (but not due to
flooding of power house attributable to the negligence of the generating company)
and due to geological reasons after adjusting the proceeds from any insurance
scheme, and expenditure incurred due to any additional work which has become
necessary for successful and efficient plant operation;
(ix) In case of transmission system, any additional expenditure on items such as
relays, control and instrumentation, computer system, power line carrier
communication, DC batteries, replacement due to obsolesce of technology,
replacement of switchyard equipment due to increase of fault level, tower
strengthening, communication equipment, emergency restoration system, insulators
cleaning infrastructure, replacement of porcelain insulator with polymer insulators,

Order in Petition No. 408/GT/2020 Page 11 of 178

 replacement of damaged equipment not covered by insurance and any other
expenditure which has become necessary for successful and efficient operation of
transmission system; and
(x) Any capital expenditure found justified after prudence check necessitated on
account of modifications required or done in fuel receiving system arising due to non-
materialization of coal supply corresponding to fullcoal linkage in respect of thermal
generating station as result of circumstances not within the control of the generating
station:
Provided that any expenditure on acquiring the minor items or the assets
including tools and tackles, furniture, air-conditioners, voltage stabilizers,
refrigerators, coolers, computers, fans, washing machines, heat convectors,
mattresses, carpets etc. brought after the cut-off date shall not be considered for
additional capitalization for determination of tariff w.e.f. 1.4.2014:
Provided further that any capital expenditure other than that of the nature
specified above in (i) to (iv) in case of coal/lignite based station shall be met out of
compensation allowance:
Provided also that if any expenditure has been claimed under Renovation and
Modernization (R&M), repairs and maintenance under (O&M) expenses and
Compensation Allowance, same expenditure cannot be claimed under this
regulation.
(4) In case of de-capitalization of assets of a generating company or the transmission
licensee, as the case may be, the original cost of such asset as on the date of de-
capitalization shall be deducted from the value of gross fixed asset and
corresponding loan as well as equity shall be deducted from outstanding loan and the
equity respectively in the year such de-capitalization takes place, duly taking into
consideration the year in which it was capitalized.”

19. The projected additional capital expenditure allowed vide order dated

26.12.2017 in Petition No. 152/GT/2015 is as under:

(Rs.in lakh)
Sl. Package Name 2014-15 2015-16 2016-17 2017-18 2018-19
No
1 BTG Package- Station (-) 416.00 0.00 0.00 0.00 0.00
2 Cost of Land & Site 19505.00 0.00 0.00 0.00 0.00
3 General Civil Works (GCW) 9793.00 0.00 0.00 0.00 0.00
4 Plant Water System (PWS) 214.00 0.00 0.00 0.00 0.00
5 Ash Handling System (AHS) (-) 413.00 716.00 0.00 0.00 0.00
6 Coal Handling System (-) 502.00 0.00 0.00 0.00 0.00
7 Reverse Osmosis (RO)System 0.00 8400.00 0.00 0.00 0.00
8 BOP Electrical 45.00 0.00 0.00 0.00 0.00
9 Township & Colony 57.00 0.00 0.00 0.00 0.00
Design, Engineering & 787.00 0.00 0.00 0.00 0.00
10
Project Management
11 Pre-Operative Expenses 1836.00 0.00 0.00 0.00 0.00
12 IT System for Software 414.00 0.00 0.00 0.00 0.00
13 Interest During Construction 145.00 - 0.00 0.00 0.00
Total (on net basis) including 31465.00 9116.00 0.00 0.00 0.00
de-capitalization
14 Cash expenses towards land (-) 5507.00 0.00 0.00 0.00 0.00
Total additional capital 25958.00 9116.00 0.00 0.00 0.00
expenditure (projected)

Order in Petition No. 408/GT/2020 Page 12 of 178

20. The Petitioner was directed by the said order dated 26.12.2017 in Petition No.

152/GT/2015 to furnish the calculation of IDC along with basis of IDC allocation

towards additional capital expenditure and the reconciliation of the same with books

of accounts.

21. The Petitioner in Form 9Bi and Form-9C of the petition, has furnished the

position of additional capitalization and de-capitalization as per books of accounts as

under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Additional capitalization as per 34679.91 14992.72 1087.48 2267.78 4390.74
books (a)
Less: Exclusions (items not 0.00 0.00 58.34 53.53 10.44
allowable / not claimed)
Additional capitalization claimed 34679.91 14992.72 1029.14 2214.25 4380.30
De-capitalization as per books of 3214.56 131.14 69.61 132.63 81.37
accounts

2014-15

22. The additional capitalisation of Rs.31465.35 lakh (after adjustment of the de-

capitalisation of Rs.3214.56 lakh) claimed in 2014-15 vis-a-vis the projected

additional capitalisation allowed in 2014-15 vide order dated 26.12.2017 in Petition

No. 152/GT/2015 are as under:

(Rs in lakh)
Head of Work/Equipment Projected additional Additional
capitalization allowed capital
vide Commission’s order expenditure
dated 26.12.2017 in claimed in
Petition No.152/GT/2015 this petition
Ash Handling System (AHS) (-) 413.00 48.65
BOP 45.00 18.21
BTG Package – Station (-) 416.00 730.69
Coal Handling System (CHS) (-)502.00 1042.53
Cost of Land & Site 19505.00 21142.23
General Civil Works 9793.00 10577.92
IT System for Software 414.00 457.52
Plant Water System 214.00 252.36
Pre-Operative expenses 1836.00 207.87
Design, Engineering & Project Management 787.00 0.00
Township & Colony 57.00 57.12

Order in Petition No. 408/GT/2020 Page 13 of 178

Interest During Construction (General Civil 145.00 144.82
Works)
Total additions (a) 31465.00 34679.91
De-capitalization (b) (included in the above) 3214.56
Total (c)=(a)-(b) 31465.00 31465.35

23. The de-capitalization of Rs.3214.56 lakh claimed as aforesaid, includes the

de-capitalization of Rs.1147.14 lakh for ‘Generator Transformer’, de-capitalization of

Rs.1550.00 lakh corresponding to adjustment in ‘Coal Handling System’ and de-

capitalization of Rs.462.07 lakh corresponding to adjustment on account of LD

adjustment in ‘Ash Handling System’.

24. The Petitioner has submitted that the actual additional capital expenditure

incurred for 2014-15 is in respect of assets which form part of the original scope of

work of the project and is up to the cut-off date of the generating station. COD of the

generating station is 24.7.2012 and, accordingly, the cut-off date of the generating

station, in terms of the 2009 Tariff Regulations is 31.3.2015. It is observed that the

claim of the Petitioner for net additional capital expenditure of Rs.31465.35 lakh in

2014-15 (after adjustment of de-capitalization) is against the net projected additional

capital expenditure of Rs.31465.00 lakh allowed vide order dated 26.12.2017 in

Petition No. 152/GT/2015. Since the additional capitalisation claimed is in respect of

assets which form part of the original scope of work of the project and is up to the

cut-off date, the net additional capital expenditure of Rs.31464.35 lakh (Rs.34679.91

lakh-3214.56 lakh) is allowed in 2014-15 in terms of Regulation 14(1)(ii) of the 2014

Tariff Regulations.

2015-19

25. In Petition No.152/GT/2015, the Petitioner had claimed projected additional

capital expenditure in respect of certain assets/ works, which form part of the original

scope of work of the project, namely, Railway System, Township & Colony, General

Order in Petition No. 408/GT/2020 Page 14 of 178

Civil Works, Reverse Osmosis plant, Ash Conveying Pipeline, Ash Handling System,

Coal Handling System, BOP Electrical, BTG Package, Design Engineering and

Project Management, Pre-operative Expenses and Additional Spares during the

period 2015-18 with a prayer for extension of cut-off date of the generating station till

31.3.2019, due to the delay in execution of these works. Though the prayer of the

Petitioner for extension of cut-off date of the generating station till 31.3.2019 was

rejected by order dated 26.12.2017, the Commission had allowed the projected

additional capitalization in 2015-16 only towards works namely, RO system and Ash

Handling System, subject to the Petitioner furnishing certain additional information at

the time of truing-up of tariff of the generating station. However, in respect of other

assets/ works like Railway System, Township & Colony, General Civil Works and

Ash Conveying Pipeline, the projected additional capitalization for the period 2015-

18 was disallowed, but liberty was granted to the Petitioner to approach the

Commission for additional capitalization, based on the actual expenditure incurred

and in accordance with the provisions of the applicable Tariff Regulations. The

relevant portions of the order dated 26.12.2017 is extracted hereunder:

Railway System, Township & Colony, General Civil Works

“91..In view of this submission and considering the fact that capitalization of projected
additional expenditure of these assets/ expenditure before 31.3.2019 is uncertain, the
consideration of the prayer of the petitioner for extension of cut-off date of the generating
station till 31.3.2019 would not serve any useful purpose. In this background, the prayer of
the petitioner for projected capitalization of the expenditure is not allowed. However, the
petitioner is granted liberty to approach the Commission for additional capitalization based
on the actual expenditure incurred for these assets and the same will be considered after
due diligence and prudence as per the regulation in vogue at that time. In view of this, the
projected additional capitalization claimed in respect of Railways System (`31100.00 lakh in
2016-17 and `9400.00 lakh in 2017-18), Township & Colony (`2000.00 lakh in 2015-16,
`3000.00 lakh in 2016-17 and `1442.00 lakh in 2017-18) and General Civil Works
for`6255.00 lakh in 2015-16 has not been allowed at this stage.”

Ash Conveying Pipeline

“95…In view of this Submission and considering the fact that the capitalization of projected
additional expenditure of the asset/ expenditure before 31.3.2019 is uncertain, the
consideration of the prayer of the petitioner for extension of cut-off date of the generating
station till 31.3.2019 would not serve any useful purpose. In this background, the prayer of
the petitioner for projected capitalization of the expenditure is not allowed. However, the

Order in Petition No. 408/GT/2020 Page 15 of 178

 petitioner is granted liberty to approach the Commission for additional capitalization based
on the actual expenditure incurred for the asset and the same will be considered in
accordance with the provisions of the Tariff Regulations applicable. Based on this, the
projected additional capitalization claimed of `11200.00 lakh in 2017-18 in respect of Ash
Conveying Pipeline has not been allowed.”

Reverse Osmosis system

100……Considering the fact that the expenditure incurred during 2015-16 is in compliance
with the directions of JSPCB mandating the installation of the RO system, we allow the
claim of the petitioner under Regulation 14(2)(ii) of the 2014 Tariff Regulations. This is
however subject to the petitioner filing certain additional information on affidavit namely the
(i) audited actual expenditure incurred for the asset (ii) LD amount, if any, recovered from
the contractor (iii) reasons for delay including IDC, if any; (iv) Cost-benefit analysis and (v)
technical capacity assessment at the time of truing-up of tariff of the generating station in
terms of Regulation 8 of the 2014 Tariff Regulations”

Ash Handling System

102……..It is however noticed that the work of „Ash handling system‟ is continuous in
nature and the said work which is included in the original scope of work of the project is
being carried out in phases, during the life time of the project. In this background, we are
inclined to allow the claim of the petitioner under this head in terms of Regulation 14(3)(iv)
of the 2014 Tariff Regulations. This is however subject to the petitioner submitting relevant
details regarding the work executed, at the time of truing-up of tariff, in terms of Regulation
8 of the 2014 Tariff Regulations”

26. Also, the Petitioner, in the Petition No.152/GT/2015, had claimed projected

additional capital expenditure during 2014-19 in respect of ‘Other assets/works’

which were not part of the original scope of work of project, namely, Building and

Civil Engineering works, Transformer and Sub-station equipment, Plant & Machinery,

Other Assets-Unclassified and IT Equipment. The Commission, while disallowing

such claims in its order dated 26.12.2017, granted liberty to the Petitioner to

approach the Commission at the time of truing-up of tariff with detailed justification,

including the provisions of the relevant regulations under which the said expenditure

was claimed. The Commission held as under:

“110. It is observed that petitioner has not filed any details regarding the break-up of the
“Plant and Machinery‟ Building & Civil works‟ and “Other un-classified assets‟ along with
justification and the relevant provisions of the regulations under which each asset/work has
been claimed for 2014-19. In this background, we are not inclined to allow the projected
additional capital expenditure in respect of items/assets which are not in the original scope
of work as shown in the above table. However, the petitioner is granted liberty to approach
the Commission at the time of truing-up of tariff along with the detailed justification and the
provisions of relevant regulations under which the expenditure has been claimed”.

Order in Petition No. 408/GT/2020 Page 16 of 178

27. In this background, the additional capital expenditure claimed by the Petitioner

in the present petition, for the period 2015-19, are summarized below:

(Rs. in lakh)
Assets/Works 2015-16 2016-17 2017-18 2018-19
Reverse Osmosis (RO) System 7798.20 (-) 28.04 57.38 -
IDC- RO system 349.53 - - -
Ash Handling System (AHS) 26.23 - - -
Balance of Plant (BOP) 445.57 5.82 - -
BTG 837.40 1.78 - -
Spare GT 846.76 35.73 - -
Coal Handling System (spares) 367.53 - - -
Cost of Land and Site 69.98 0.40 - 2112.86
General Civil Works 791.99 184.39 154.47 147.49
Railway System 2412.62 - - -
IDC- Railway System 448.94 - - -
Town Ship & Colony 43.38 - - -
New Schemes 554.59 829.06 2002.40 2119.96
Total additional capital expenditure 14992.72 1029.14 2214.25 4380.30
claimed
De-capitalization 131.14 69.61 132.63 81.37
Net additional capital expenditure 14861.58 959.53 2081.62 4298.93
claimed

28. The Petitioner has submitted that the capitalization of these packages that

form part of the original scope of work of the project could not be completed till the

cut-off date (31.3.2015) on account of various factors which were beyond the control

of the Petitioner and due to ‘Force Majeure’ reasons. The Petitioner has also

submitted that after the cut-off date, most of the project packages were completed in

2015-16, except for Railway System, General Civil Works (GCW) and Land & Site,

which are expected to be completed by end of 2020-21 i.e. by 31.3.2021. However,

some assets in these packages have been put to use during the 2014-19 tariff period

and, accordingly, part capitalization of these packages falls in the said period and the

balance within the 2019-24 tariff period. The Petitioner has added that in majority of

cases where additional capitalization within the original scope of work of the project

has been delayed beyond the cut-off date (31.3.2015), the same has been on

account of reasons beyond the control of the Petitioner. The Petitioner has,

therefore, submitted that in respect of the additional capitalization during the period

Order in Petition No. 408/GT/2020 Page 17 of 178

2015-19, the Commission may exercise its power under Regulation 3(25) read with

Regulation 8(3) and Regulation 54 of the 2014 Tariff Regulations (Power to relax) to

consider the delays faced by the Petitioner due to ‘Force Majeure’ events and to

approve the additional capitalization, within the original scope of work. In addition to

this, the Petitioner has submitted that as the generating company is not entitled to

Compensation Allowance as per Regulation 17 of the 2014 Tariff Regulations, funds

for minor capital assets for construction or procurement under the said allowance

was not available to the Petitioner. Therefore, for such expenditure on capital assets,

the Petitioner has sought invocation of Regulation 54 of the 2014 Tariff Regulations

(Power to relax) for consideration of such additional capital expenditure in terms of

Regulation 8(3) and Regulation 14(3) read with the principles laid down under

Section 61 of the Electricity Act, 2003.

29. The Respondent, KSEBL has submitted that Regulation 14 of the 2014 Tariff

Regulations allows additional capitalization limited to works within the original scope

of work of the project. It has also stated that the additional capital expenditure

claimed in respect of assets/ works beyond the original scope of work, such as Fire

tender with shed & fixed foam system, NABL accredited lab, Yard sprinkling and fire

detection system in CHP, Re-heater modification & MTM installation, Coal pit run-off

mechanised drainage system & segregation of storm water, Power supply

redundancy and re-arrangement at BOP area, Gate house near junction tower & E-

security system, Replacement of IT Equipment, Labour Colony, Augmentation of

store area and MAX DCS Version up-gradation, do not fall within the scope of

‘Change in law’ and these claims ought to be carried out from the O&M expenses

allowed to the generating station in terms of the 2014 Tariff Regulations. Based on

the submissions of the parties.

Order in Petition No. 408/GT/2020 Page 18 of 178

30. We examine the additional capital expenditure claimed for the period 2015-19

in the following paragraphs.

Reverse Osmosis (RO) Plant

31. The Commission vide order dated 26.12.2017 in Petition No.152/GT/2015 had

allowed the projected additional capital expenditure of Rs.8400 lakh for Reverse

Osmosis Plant in 2015-16, subject to the Petitioner furnishing certain additional

information, namely the (i) audited actual expenditure incurred for the asset; (ii) LD

amount, if any, recovered from the contractor; (iii) reasons for the delay including

IDC, if any; (iv) Cost-Benefit analysis; and (v) Technical capacity assessment at the

time of truing-up of tariff of the generating station in terms of Regulation 8 of the

2014 Tariff Regulations. In compliance with this direction, the Petitioner has claimed

the actual additional capital expenditure of Rs.8147.73 lakh [Rs 7798.20 +349.53

lakh (IDC)] in 2015-16, (-) Rs.28.04 lakh in 2016-17 and Rs.57.38 lakh in 2017-18

towards RO System, duly supported by Auditor’s certificate. The Petitioner has also

submitted that there was no occasion for recovery of Liquidated Damages (LD) from

the contractor and since the RO plant was not delayed, there was no impact on

increase in IDC. As regards Cost-benefit analysis, the Petitioner has submitted the

following:

(a) The specific energy requirement of RO technology is 70% less than

other desalination methods. The water recovery ratio of RO desalination
system is relatively higher than other methods. The reverse osmosis
desalination process is able to eliminate both organic and inorganic pollutants
from water. RO technology has the advantages of convenient operation,
equipment compactness, working environment safety and outlet water quality
can satisfy different requirements. In power plant, the economic benefit is not
the main factor that affects the recycled water promotion which is mandated
by Environmental laws;

(b) Due to particularity and water quality of the boiler water supply, the cost
and optimization of desalination cannot be directly applied in the RO
treatment process in power plant. RO technology is known as the most

Order in Petition No. 408/GT/2020 Page 19 of 178

 reliable, cost effective technology, with high rate of energy efficiency in
producing fresh potable water in comparison to other desalination
technologies. The Petitioner carried out extensive study involving Tata Power
Engineering Department and Tata Consulting Engineers (TCE) to study the
water balance system and acted on their advice on corrective action to be
taken to ensure such Zero Liquid Discharge (ZLD) condition as imposed upon
by Jharkhand State Pollution Control Board (JSPCB). Among various
technologies considered during the detailed study, RO based Water
Treatment System was found most suitable due to high reliability and
effectiveness;

(c) With regard to technical capacity assessment, initial Performance

Guarantee (PG) tests were carried out for the RO plant in November, 2016
after construction of the RO plant. However, due to various reasons, these
tests were not successful. Subsequently, a month long ZLD PG test was
conducted at the generating station from 31.5.2018 to 30.6.2018. The test
was conducted in accordance with the approved PG test procedure and as
per the modalities finalized between the Petitioner and ASA (M/s Aquatech) in
the meeting held at site on 30.5.2018. ZLD operated at full load during this
period of 30 days. Most of the parameters were within the guaranteed limit.
Such additional cost has been borne by the Petitioner to meet the statutory
compliance of JSPCB through installation of RO Plant to ensure ‘zero water
discharge’ from the generating station; and

(d) The JSPCB provides the requisite ‘Consent to Operate’ (CTO) to

Petitioner for operation of the project in view of fulfilment of certain
requirements as per the Water (Prevention and Control of Pollution) Act, 1974
and Air (Prevention and Control of Pollution) Act, 1981. JSPCB in the CTO
letter dated 11.5.2012, had directed the Petitioner to ensure zero leakage
discharge from the generating station. As per norms prescribed by JSPCB,
the process water cannot be discharged to Maithon Dam Reservoir, due to its
adverse impact on the aquatic life and ecology.

32. It is observed from the above that the Petitioner, in order to ensure

compliance with the directions of JSPCB (Jharkhand State Pollution Control Board)

and in order to reduce the make-up water consumption, had taken up the installation

of RO system and had obtained Board’s approval for the expenditure in 2013, but

capitalized the expenditure in 2015-16. In view of the clarification and considering

the fact that the additional capital expenditure incurred is within the approved limit of

Rs.8400 lakh allowed vide order dated 26.12.2017 in Petition No. 152/GT/2015, the

Order in Petition No. 408/GT/2020 Page 20 of 178

claim of the Petitioner for Rs.8147.73 lakh [Rs.7798.20 +349.53 lakh (IDC)] in 2015-

16 and Rs.57.38 lakh in 2017-18 is allowed under Regulation 14(3)(ii) of the 2014

Tariff Regulations. Also, the negative adjustment of (-) Rs 28.04 lakh for RO system

in 2016-17, which is in respect of the expenditure claimed for this asset in 2015-16,

is also considered and allowed for the purpose of tariff.

Ash Handling System

33. The Commission, in its order dated 26.12.2017 in Petition No.152/GT/2015

had allowed the projected additional capital expenditure of Rs.716.00 lakh in 2015-

16 for ‘Ash Handling System’ under Regulation 14(3)(iv) of the 2014 Tariff

Regulations, subject to the Petitioner submitting relevant details regarding the work

executed, at the time of truing-up of tariff in terms of Regulation 8 of the 2014 Tariff

Regulations. The Petitioner, in this petition, has claimed actual additional capital

expenditure of Rs.26.23 lakh in 2015-16 for this asset and has submitted that most

of the works have been completed by the cut-off date. It has, however, submitted

that initial spares amounting to Rs.26.23 lakh, for which procurement was

initiated before the cut-off date, was delivered and capitalised in 2015-16.

Therefore, the Petitioner has submitted that the Commission may permit

capitalization of Rs.26.23 lakh in terms of Regulation 14(3)(iv) of the 2014 Tariff

Regulations. Since the work of ‘Ash Handling System’ is continuous in nature and

is carried out in phases, during the lifetime of the project and is within the original

scope of work of the project, we allow the actual additional capital expenditure of

Rs.26.23 lakh in 2015-16 under Regulations 14(3)(iv) of the 2014 Tariff Regulations.

Railway Infrastructure Package

34. The Petitioner, in Petition No.152/GT/2015, had claimed projected additional

capital expenditure of Rs.31100.00 lakh in 2016-17 and Rs.9400.00 lakh in 2017-18

Order in Petition No. 408/GT/2020 Page 21 of 178

for ‘Railway System Package’ and the same was disallowed by order dated

26.12.2017, with liberty to approach the Commission for additional capitalization

based on the actual expenditure incurred for the said asset/ work, for consideration

of the Commission in accordance with the regulations in vogue. The Petitioner, in

this petition, has claimed actual additional capital expenditure of Rs.2861.56 lakh

[2412.62+448.94 (IDC)] in 2015-16 towards ‘Railway System’ which form part of the

original scope of work of the project, but after the cut-off date. In justification of the

said claim, the Petitioner has submitted the following:

a) Though the overall Railway Infrastructure Package is yet to be completed

and operationalized by the Petitioner, owing to severe land acquisition related
disputes as explained in this petition and detailed submissions in Petition No.
152/GT/2015, the Petitioner has completed the construction of number of
roads, over-bridges and under-passes for smooth movement of public
transport by road, which were falling in the way of Railway corridor. Pending
completion of Railway corridor for the purpose of coal transportation to the
plant, these Civil works viz., roads, over-bridges, under-passes were opened
for public use and, therefore, the amount of Rs. 24.13 crore along with the
corresponding IDC of Rs.4.49 crore has been capitalised in the books of
accounts of the Petitioner. Accordingly, the same has been submitted for
capitalisation for the purpose of tariff;

b) In case, capitalisation of these civil assets is not allowed till the completion
of Railway Infrastructure Package as Railway Infrastructure has not been put
to use, capitalisation (along with corresponding additional IDC) of the same
may be allowed along with remaining Railway Package and to allow such
capitalisation along with corresponding additional IDC or in the alternative, the
Petitioner may be allowed to amend its proposal to this effect. The decision of
the Commission in its order dated 4.12.2014 in Petition No. 17/GT/2013 and
order dated 9.10.2018 in Petition No. 38/MP/2018 is applicable in this case.

35. It is pertinent to mention that the Petitioner, in Petition No.152/GT/2015 had

sought extension of cut-off date of the generating station till 31.3.2019 stating that

some of the works of ‘Railway System’ may not even be completed before

31.3.2019, with liberty to approach the Commission after completion of the said

works. From the submissions of the Petitioner, in this petition, it is evident that the

Order in Petition No. 408/GT/2020 Page 22 of 178

‘Railway Infrastructure Package System’ work has not yet been completed and the

asset has not been put to use. Only some civil work like roads, over-bridges and

under-passes for smooth movement of public transport have been constructed and

the expenditure incurred on these works, is sought to be capitalised by the

Petitioner, under this head. In other words, the additional capitalisation claimed by

the Petitioner, is not in respect of the completion of the Railway System, but only for

few civil works which have been completed. Without the completion of the Railway

System, the construction of these civil assets for public transport has no nexus with

the generation of power from the plant. In our view, the additional capitalisation of

these civil assets cannot be permitted, unless the Railway System is completed and

put to use for generation and supply of power. The Petitioner’s reference to order

dated 9.10.2018 in Petition No. 38/MP/2018 in justification of the prayer for

relaxation has no relevance in the present case and is, therefore, not considered. In

view of this, the prayer of the Petitioner for additional capitalisation of Rs.2861.56

lakh in 2015-16 is not allowed. The Petitioner may approach the Commission after

completion of the work related to Railway System is over.

Township and Colony

36. The Petitioner, in Petition No. 152/GT/2015 had claimed projected additional

capital expenditure of Rs. 2000.00 lakh in 2015-16, Rs.3000.00 lakh in 2016-17 and

Rs.1442.00 lakh in 2017-18 for ‘Township & Colony’ and the same was disallowed

by order dated 26.12.2017, with liberty to approach the Commission for additional

capitalization based on the actual expenditure incurred for the said asset/ work and

for consideration as per regulations in vogue. The Petitioner, in this petition, has

claimed actual additional capital expenditure of Rs. 43.38 lakh in 2015-16 for

‘Township & Colony’ which form part of the original scope of work, but after the cut-

off date. The Petitioner has submitted that while the expenditure of Rs.57.00 lakh

Order in Petition No. 408/GT/2020 Page 23 of 178

capitalised in 2014-15 was within the approved total capitalisation of Rs.34680 lakh,

an expenditure of Rs.43.38 lakh was capitalised in 2015-16 for this work, which form

part of the original scope, but was deferred. The additional capitalisation claimed for

‘Township & Colony’ work in 2015-16 is on account of the same being deferred from

2014-15. The works pertaining to the township and colony, which are within the

original scope of work, are spilled over works which had started prior to the cut-off

date and, hence, the Petitioner was granted liberty vide order dated 26.12.2017 in

Petition No 154/GT/2015 to approach the Commission after completion of the works.

In the above background, we allow the additional capitalisation of Rs.43.38 lakh in

2015-16 as claimed by the Petitioner.

Cost of Land & Site and General Civil Works

37. The Petitioner, in Petition No.152/GT/2015, had not claimed any projected

additional capital expenditure towards ‘Cost of Land & Site’ during the period 2015-

19. However, the Petitioner, in the said petition, had also claimed projected

additional capital expenditure of Rs.6255 lakh in 2015-16 for ‘General Civil Works’

with a prayer for extension of the cut-off date till 31.3.2019 and the same was

disallowed vide order dated 26.12.2017. However, liberty was granted to the

Petitioner to approach the Commission for additional capitalization of ‘General Civil

Works’, based on the actual expenditure incurred and to be considered in

accordance with the regulations in vogue. The Petitioner has submitted justifications

for claim towards Cost of Land & Site and General Civil Works as stated below.

A. Cost of Land & Site

38. The Petitioner, in this petition, has claimed the actual additional capital

expenditure of Rs.69.98 lakh in 2015-16, Rs. 0.40 lakh in 2016-17 and Rs.2112.86

lakh in 2018-19 towards ‘Cost of Land & Site’ which form part of the original scope of

Order in Petition No. 408/GT/2020 Page 24 of 178

work, under Regulation 14(1)(ii) read with Regulation 54 (Power to Relax) of the

2014 Tariff Regulations. As regards ‘land acquisition’ issues and consequent time

and cost overrun, the Petitioner has mainly submitted the following:

(a) Acquisition of land for setting up of land-intensive projects like that for a
thermal power plant is a humongous and time-consuming task. The task
involved becomes even more complicated when the Project Proponent/
Developer has to deal with vast and multiple land parcels, in an area that has
the environment of socio-cultural disturbances with a history of fragile
industrial relations in and around that area;

(a) MPL has made earnest efforts in coordinating with various stakeholders
involved, such as its equity partner – DVC (which is a statutory entity of the
Central Government), the land owners, the State Government, various
Government departments and other multitude of associated entities, for timely
completion of the thermal power project, which today benefits Distribution
Licensees in New Delhi, West Bengal, Jharkhand and Kerala;

(b) Despite serious planning and prudence, various extraneous factors that
are out of bound of the project developer’s control have delayed the project
completion timelines. The said delay is due to ‘Force Majeure’ conditions and,
therefore, such reasons cannot in any manner be attributable to MPL.

(c) While the zero date of the Project was 25.10.2007, possession of land
and, hence, construction activity could not be started until R&R Policy was
approved by Government of Jharkhand and a settlement reached with Project
Affected People (“PAP”) only on 31.03.2008. There is incremental cost
associated with time delay/ time overrun which has ultimately led to increase
in Project Cost;

(d) This following summary of events highlights some of the key facts w.r.t.
land acquisition for the Project of the relevant period in the past and several
associated issues in a chronological manner:
(i) The land earmarked for the project comprises land of various natures
viz. Rayati (Private), Gair Majruah (GM) or State Government owned and
Forest land;
(ii) The land earmarked for the project was acquired (Rayati) by DVC or
leased (GM and Forest land) to DVC between the period from 2002 to
2009, but in phases, and was not transferred to MPL, either on paper or
physically till 31.3.2008. Some part of project land is yet to be transferred
in favour of MPL, although its possession has been given to MPL;
(iii) In the absence of R&R policy in the State, MPL had to take initiatives
in the R&R activities associated with the Project;

Order in Petition No. 408/GT/2020 Page 25 of 178

 (iv) The possession of major portion of land to MPL was available after
significant delay i.e. after 31.3.2008, when R&R Policy was framed by
Government of Jharkhand (‘GoJ’);
(v) Once major portion of the land was under possession of MPL, Project
related activities were initiated and expedited to catch up with the
scheduled timelines.
(vi) However, MPL faced massive resistance from the landowners not
only during construction phase of the Project but also thereafter, leading
to cases being filed, some of which are still pending. Therefore, MPL was
compelled to litigate at multiple occasions to settle land acquisition related
disputes. Some of the Writ Petitions were resolved by the Hon’ble High
Court of Jharkhand and some of them are still pending before the Land
Acquisition Court.
(vii) Securitization of the project land to lenders could not be done as MPL
could not obtain title/ sub-lease of land in spite of repeated follow ups with
relevant authorities.
(viii) GM and Forest land earmarked for the Project, though transferred
to DVC by the Government of Jharkhand, was not granted the requisite
permission by Government to enable DVC for further transfer/ sub-lease
to MPL.

(ix) There was change in the policy clarity on whether land could be sub-
leased for long period in the name of private entities like MPL.

(x) Therefore, even though DVC was a 26% equity partner for the Project,
the land transferred to DVC by the Government of Jharkhand was finally
permitted to be transferred and made available to MPL in 2018 i.e. after
delay of almost 10 years.
(xi) MPL made relevant payments with respect to the acquisition/ sub-
lease of land within reasonable timelines against the original/ amended
fees/ lease to the respective department.

(xii) GoJ, which permitted MPL physical possession of GM land and its
transfer under sub-lease in 2010, had later gone back on their permission,
citing provisions of the (new) amendments in the land policy of 2011/14 in
the State, which made the process carried out till then redundant, thereby
leading to additional associated cost and loss of time. The Change in
Policy of GoJ fall within the scope of ‘Change in law’.

(xiii) GoJ was fully aware of the shareholding pattern of MPL at the time
of granting permission and despite the same, revoked the permission for
sub-leasing of the land granted to it on the grounds that MPL is not a
Government entity.

Order in Petition No. 408/GT/2020 Page 26 of 178

 (xiv) On the grounds of new/ amended policy, provisions and restrictions
on sub-lease to only Government entities, GoJ had asked DVC to
surrender its sub-lease permission and the leased land, back to the
Government.
(xv) MPL initiated its efforts for direct lease of land (GM land and un-
notified Forest land) from GoJ under the land Policy of 2017. In response
thereto, MPL received fresh ‘Demand note’ for the difference in current
and previously paid rates with regard to un-notified land from Government
which it has paid in 2018-19. The Demand note for GM land is expected
to be received by MPL in the near future.

The Petitioner has furnished in detail, the justification for time and cost overrun

in Annexure-P/4 and P/5 of the petition.

B. Cost Over-run for land

39. The Petitioner has submitted that in order dated 26.12.2017 in Petition

No.152/GT/2015, a total of Rs.19505 lakh was approved towards Cost of Land &

Site expenses in 2014-15. It has stated that the actual capitalisation under Land &

Site head had increased to Rs.21142 lakh as compared to initially approved amount

of Rs.19505 lakh. This, according to the Petitioner is due to internal adjustment of

Rs.1628 lakh between two heads viz. “Cost of Land & Site” and “Pre-Operative

expenses”. The Petitioner has also submitted that the capitalization approved by the

Commission under Pre-operative expenses was Rs.1836 lakh in 2014-15. However,

the actual additional capitalization towards Pre-operative expenses was Rs. 208 lakh

in 2014-15 and the remaining amount of Rs.1628 lakh initially approved under Pre-

operative expenses was capitalised under “Cost of Land & Site” owing to the nature

of expense as the statutory auditor changed the category of lease hold land due to

which the amount of Rs.1628 lakh was shifted from pre-operative expenses to cost

of land and is, thus, claimed as part of capitalisation under the head ‘Cost of Land &

Site in 2014-15’. The Petitioner has further submitted that there has been inter-se

adjustment between these two heads of capitalisation, owing to re-categorization of

Order in Petition No. 408/GT/2020 Page 27 of 178

expenses heads in audited accounts way back on 11.5.2015 by statutory auditor and

there is no increase in the overall actual capitalisation under these heads put

together in 2014-15. In addition to the above, the Petitioner has submitted that it had

incurred an expenditure of Rs.70 lakh in 2015-16, Rs.40 lakh in 2016-17 and

Rs.2113 lakh in 2018-19 for purchase/ leasing of following land parcels:

(i) Purchase of private land in Mugma Village for Railway Corridor (Rs.0.70 crore in
2015-16, Rs.0.004 crore in 2016-17 and Rs.1.72 crore in 2018-19);
(ii) Payment of fresh demand for un-notified Forest land admeasuring 191.67 acre
(Rs.11.61 crore in 2018-19);
(iii) Payment of demand for GM land acquired for Railway Corridor and Payment of
License fee for Railway land acquired for Railway Corridor (Rs.6.47 crore in
2018-19);

(iv) Payment of fresh demand of GM Land (114.95 acre) for the Project (2019-24);

40. The details of additional capitalization towards Land & Site for 2015-19, as

tabulated by the Petitioner, are as under:

(Rs. in crore)
Category 2015-16 2016-17 2017-18 2018-19
Main Plant Land
Raiyati Freehold land-Main Plant - - - -
Forest
Forest Land- Main project - - - 11.61
Land
GM land GM land - - - -
Railway Land
Raiyati Freehold Land- Railway 0.7 0 - -
Freehold Land- Railway-
- - - 1.72
Mugma
GM Land GM land Railway-I - - - -
GM Land- Railway-II - - - 6.47
Eastern Railway Land-II - - - 1.04
Eastern Railway Land-I - - - 0.3
Krishi Farm and tribal land - - - -
Contingency - - - -
Total 0.7 0 - 21.13

41. Accordingly, the Petitioner has submitted that due to changes in policies and

the stand of ‘GoJ’ on transfer of land, the land transfer to the Petitioner for the

Project had been delayed. The Petitioner had been asked to pay additional amount

Order in Petition No. 408/GT/2020 Page 28 of 178

on account of transfer of land from DVC to the Petitioner and also additional

payments to the landowners were mandated by the State Government, thereby

increasing the project cost.

C. General Civil Works

42. The Petitioner has claimed actual additional capital expenditure of Rs.791.99

lakh in 2015-16, Rs.184.39 lakh in 2016-17, Rs.154.47 lakh in 2017-18 and

Rs.147.49 lakh in 2018-19 towards ‘General Civil Works’ which form part of the

original scope of work, under Regulation 3(25) and Regulation 8(3) read with

Regulation 54 of the 2014 Tariff Regulations. The Petitioner has submitted that delay

in execution of ‘General Civil Works’ package capitalised during the period 2015-19

is on account of the various ‘Force Majeure’ reasons which were beyond the control

of the Petitioner. As regards General Civil Works (GCW), the Petitioner has

submitted that in terms of the liberty granted vide order dated 26.12.2017, the

Petitioner has claimed actual capital expenditure of Rs.10578 lakh in 2014-15 for

General Civil Works against the approved cost of Rs.9793 lakh. It has also submitted

that an amount of Rs.787 lakh allowed in 2014-15 towards Design, Engineering and

Project Management has been capitalized under ‘General Civil Works’ in 2014-15 as

‘Engineering and Project Management’ were provided for ‘General Civil Works’

package. Thus, a total amount of Rs.10578 lakh in 2014-15 has been claimed under

this head, taking both the heads together. According to the Petitioner, there has

been inter-se adjustment between these two heads of capitalization owing to re-

categorization of expenses, but there is no increase in the overall actual

capitalization under these heads put together. The details of the expenditure and the

reasons for the delay as furnished by the Petitioner are as under:

(i) Boundary Wall and Peripheral Road inside Plant along Boundary Wall:
Boundary wall work was delayed due to various land related disputes and other
problems which were beyond the control of the Petitioner. The contract for boundary

Order in Petition No. 408/GT/2020 Page 29 of 178

 wall was awarded to M/s Premier Traders in 2012-13. However, due to various land
disputes and other problems, the contractors could not complete the work on time
citing problems created by local villagers as is evident from letters dated 23.6.2013,
7.7.2014, 23.9.2014, 19.1.2015 and 3.3.2016. Due to non-completion of the boundary
wall, the Jharkhand Pollution Control Board (JPCB) in its Consent to Operate letter
dated 23.5.2014 directed that the occupier shall construct pucca minimum 10 feet
high boundary wall. The boundary wall was, therefore, required to be expedited
covering the entire area around ash pond by wall of 7 km (approx.) length to securitise
most of the key and sensitive areas. Various police complaints dated 3.2.2016,
5.5.2017, 13.9.2017, 6.4.2018 were also lodged by the security supervisor regarding
agitation initiated by villages. At present, 226 acres (out of 1116 acres) of plot of land
is not covered by boundary wall because this 226 acre land parcel is partly inhabited
by tribal and non-tribal people and, hence, this area had to be cordoned off internally
with grid pillars. As most of the key and sensitive areas have been covered and
securitised with proper boundary wall, it is proposed that entire remaining land asset
including grid pillars is covered, securitised or demarcated by boundary wall (balance
6.45 km out of total 27.75 km). The completion status of the boundary wall is as
under:

Sl. No. Description Completion

status (in km)
1 Boundary wall completed by 31st March 2014 13.75
2 Boundary wall completed by 31st March 2016 4
3 Boundary wall completed by 31st March 2019 3.55
4 Boundary wall to be constructed 6.45
27.75

The phasing of boundary wall capitalization is Rs 4.71 crore in 2015-16, Rs 1.43

crore in 2016-17, Rs 1.54 crore in 2017-18 and Rs 1.47 crore in 2018-19 and Rs 1.60
crore in 2019-20.

(b) Field Hostel (part of work got delayed): The Commission in its order dated
19.11.2014 (in Petition No.274/2010) had acknowledged that there is a need of field
hostel within the boundaries of the plant for smooth, intervention free operation of the
plant, considering the difficult remote location of the plant, accessibility at odd hours
and frequent blockages and agitation by local villagers backed by factional politicians.
The contract for construction of field hostel was awarded to M/s Kanwar
Enterprises (P) Ltd in 2014. However, while carrying out the construction work, the
contractor faced several hindrances from the local people. Therefore, M/s Kanwar
addressed letter dated 13.5.2015 to the Petitioner, citing the reason for delay of field
hostel and requested for time extension for the work. When the contractor started
the work by making burgees for the layout and by installation of borewell, the locals
damaged the burgees and borewell claiming to be owners of the land. This problem
took around 2 months to be sorted out. Again, after starting the work, it was
stopped by the locals demanding that work should be executed through them
only. The contractor was ready, but the rates were very high and it took almost one
month to convince them and make them ready to work at genuine rates. But the
villagers could not deliver the required number of labour and the work was
stopped. After resuming the work with available labour, it was again stopped by
local vendors for about 45 days due to land dispute. Work was also stopped for 15

Order in Petition No. 408/GT/2020 Page 30 of 178

 days by Samity people and the locals. There were also cases of hindrances by
local vendors for around 30 days citing rate revision and various other reasons. In
view of above reasons, which were totally out of control of the Petitioner and its
contractor, the contractor asked for extension of contract thereby delaying some part
of the project. Due to above issues, some part of the project got delayed by almost
3 months and 20 days and was finally completed in 2015-16. An amount of Rs.321
lakh and Rs.42 lakh was capitalized in 2015-16 and 2016−17 against Field Hostel and
minor pending works of Gate House, Township etc.

43. We have examined the claims and justifications given by the Petitioner.

According to the Petitioner, the cost of land had increased on account of changes in

the policies of the Government of Jharkhand. Also, the works of Boundary wall and

the peripheral road inside Plant along Boundary Wall and Field Hostel got delayed

due to various force majeure events. Based on this, the Petitioner has prayed for

relaxation of the provisions of 2014 Tariff Regulations to allow the additional

capitalisation incurred due to reasons not attributable to the Petitioner. Regulations

3(25) and 54 of the 2014 Tariff Regulations are extracted hereunder:

Regulation 54: Power to Relax. The Commission, for reasons to be recorded in

writing, may relax any of the provisions of these regulations on its own motion or on an
application made before it by an interested person.”
Regulation 3(25). ‘Force Majeure’ for the purpose of these regulations means the
event or circumstance or combination of events or circumstances including those
stated below which partly or fully prevents the generating company or transmission
licensee to complete the project within the time specified in the Investment Approval,
and only if such events or circumstances are not within the control the generating
company or transmission licensee and could not have been avoided, had the
generating company or transmission licensee taken reasonable care or complied with
prudent utility practices: a) Act of God including lightning, drought, fire and explosion,
earthquake, volcanic eruption, landslide, flood, cyclone, typhoon, tornado, geological
surprises, or exceptionally adverse weather conditions which are in excess of the
statistical measures for the last hundred years; or (b) Any act of war, invasion, armed
conflict or act of foreign enemy, blockade, embargo, revolution, riot, insurrection,
terrorist or military action; or (c) Industry wide strikes and labour disturbances having a
nationwide impact in India;

44. It is observed from submissions of the Petitioner that the land payments are

mainly due to (i) payment of fresh demand for un-notified Forest land, payment of

demand for GM land acquired for Railway Corridor and (ii) payment of license fee for

Railway land acquired for Railway Corridor etc. The payment delays were mainly

Order in Petition No. 408/GT/2020 Page 31 of 178

related with Railway Corridor disputes and Land site development. The purchase of

private land in Mugma Village for Railway Corridor (for Rs.70 lakh in 2015-16, Rs.40

lakh in 2016-17 and Rs.172 lakh in 2018-19) and the Payment of fresh demand for

un-notified Forest land measuring 191.67 acre (for Rs.1161 lakh in 2018-19) pertains

to Railway corridor and the delay is attributable to the dispute which had arisen due

to wrongful disbursement of land compensation amongst the beneficiaries. This

resulted in Writ Petition No. 5084 of 2016 being filed by the Petitioner before the

High Court of Jharkhand, wherein, directions were issued by the High Court on

6.9.2016 to the Deputy Commissioner, Dhanbad to expedite the resolution of land

issues. As the matter could not be fully resolved, the Petitioner again filed Writ

Petition No. 5242 of 2017 before the High Court of Jharkhand and the High Court in

its judgement dated 22.2.2018, directed the State Government (GoJ) to cancel the

earlier awards passed in favour of wrongful persons/ awardees and to further

prepare fresh awards in favour of genuine persons within four months. The High

Court’s order dated 22.2.2018 has been enclosed as Annexure P6/H to the petition.

In respect of (i) Payment of demand for GM land acquired for Railway Corridor and

payment of license fee for Railway land acquired for Railway Corridor (for Rs.647

lakh in 2018-19) and (ii) Payment of fresh demand of GM Land (114.95 acre) for the

project in 2019-24, it is noticed that additional payments were required to be made

due to change in the policy of State Government (GoJ) for leasing the land. The

sequence of events in regard to the leasing of land is enumerated below:

(i) On 5.1.2010: The Government of Jharkhand accorded in-principal

approval to DVC for sub-leasing 114.95 acres (already leased to DVC) of land
to MPL. Reference placed at annexure P/5-C of the petition.

(ii) On 22.1.2011: The Government of Jharkhand amended the leasing

policy of land and held that on leased out land, third party right cannot be
created and thereby sub-leasing already accorded to MPL vide letter dated
5.1.2010 became ineffective. Reference placed at annexure P/5-E of the
petition.

Order in Petition No. 408/GT/2020 Page 32 of 178

 (iii) On 30.9.2014: The Government of Jharkhand directed DVC to
surrender 114.95 acres (already leased to DVC) of land stating that the DVC
share being less than 51% in MPL, it does not fall under the category of
government company as per Company Act. Thus, sub-leasing to MPL by DVC
was withdrawn. Reference placed at annexure P/5-H of the petition.

(iv) On 4.1.2017: The Government of Jharkhand revised the rates for

leasing of the land and thereby creating additional liability to MPL for the same
land which was sub-leased to the Petitioner by DVC. Reference placed at
annexure P/5-K of the petition.

(v) On 20.10.2017: DVC intimated to Govt. of Jharkhand that DVC Board

had approved the surrender of 114.95 acres of land for subsequent grant of the
same land to the Petitioner. Reference placed at annexure P/5-L of the petition.

(vi) On 08.11.2017: Petitioner requested the Govt. of Jharkhand that to

initiate the leasing process directly in favour of the Petitioner and the same land
is already in use for power plant. Reference placed at annexure P/5- of the
petition.

(vii) On 24.11.2018: The Govt. of Jharkhand directed the Petitioner for

further payment of Rs.43.69 lakh for leasing land to the Petitioner. Reference
placed at annexure P/5-T of the petition.

45. On perusal of the sequence of events and documents furnished by the

Petitioner, it is observed that the delay in payment towards land and site was due to

change in policy of the State Government of Jharkhand. Scrutiny of the documents

furnished indicates that ‘land issues’ had prolonged till 24.11.2018, i.e. even after the

cut-off date. Though the said work form part of the original scope of work of the

project, the Petitioner had to continue the execution of these works even after the

cut-off date on account of the delay in the availability of land and site. Similarly, the

delay in the development of Railway Corridor was cleared when Hon’ble High Court

of Jharkhand vide its judgment dated 22.2.2018 had directed the State Government

of Jharkhand to cancel the earlier awards passed in favour of wrongful awardees

and to prepare fresh awards in favour of genuine persons and to proceed in

accordance with law. The Petitioner had made all payments mandated due to

change in policy of the State Government of Jharkhand and as a consequence of

cancellation of wrongful disbursement of land compensation award. Therefore, the

Order in Petition No. 408/GT/2020 Page 33 of 178

expenditure so incurred has been claimed in this petition on actual and audited

basis. Similarly, in the case of General Civil Works (Boundary wall and Field hostel),

the delay in execution of these works is consequent upon the delay in the availability

of land and are for reasons not attributable to the Petitioner. As regards the prayer of

the Petitioner for extension of cut-off date till 31.3.2019, the Commission in its order

dated 26.12.2017 in Petition No.152/GT/2015 had decided as under:

“In view of this submission and considering the fact that capitalization of projected
additional expenditure of these assets/ expenditure before 31.3.2019 is uncertain, the
consideration of the prayer of the petitioner for extension of cut-off date of the
generating station till 31.3.2019 would not serve any useful purpose. In this
background, the prayer of the petitioner for projected capitalization of the expenditure
is not allowed. However, the petitioner is granted liberty to approach the Commission
for additional capitalization based on the actual expenditure incurred for these assets
and the same will be considered after due diligence and prudence as per the
regulation in vogue at that time…”

46. As already observed, the delay in the availability of land & site was due to

changes in the policy of the Govt. of Jharkhand, cancellation of wrongful

disbursement of land compensation award and clearance for the development of

Railway Corridor after payment of compensation. Also, the delay due to non-

availability of land had caused the delay in execution of the General Civil Works by

the Petitioner and the same cannot be attributable to the Petitioner. From the

documents enclosed by the Petitioner, it is noticed that the Petitioner has been

coordinating with the local administration for speedy resolution of the land issues and

has been taking steps to mitigate the delay. Accordingly, actual additional

capitalisation of Rs.69.98 lakh in 2015-16, Rs 0.40 lakh in 2016-17 and Rs.2112.86

lakh in 2018-19 towards Land & Site is allowed under Regulation 14(3(i) of the 2014

Tariff Regulations. Consequently, as the General Civil Works were also delayed due

to delay in the possession of land, for which reasons and justifications have been

furnished in previous paragraphs, the actual additional capitalisation of Rs.791.99

lakh in 2015-16, Rs.184.39 lakh in 2016-17, Rs.154.47 lakh in 2017-18 and

Order in Petition No. 408/GT/2020 Page 34 of 178

Rs.147.49 lakh in 2018-19 towards General Civil Works is also allowed under

Regulation 14(3(i) of the 2014 Tariff Regulations.

Coal Handling System

47. The Petitioner, in Petition No.152/GT/2015 had claimed projected additional

capital expenditure of Rs.959.00 lakh in 2015-16 and Rs.2142.00 lakh in 2016-17

towards ‘Coal Handling System’ under Regulation 14(3) of the 2014 Tariff

Regulations. By order dated 26.12.2017, the said claim was rejected as under:

“In response to the Commission’s directions vide ROP of hearing dated 12.1.2016, the
petitioner has not furnished any details of the works to be executed, the
reasons/justification for the delay in the execution of ‘Coal Handling System’ beyond
the cut-off date of the project. In this background, the projected additional capital
expenditure for Coal Handling System claimed by the petitioner after the cut-off date is
not allowed”

48. The Petitioner, in the present petition, has claimed actual additional capital

expenditure of Rs.367.53 lakh (including spares for Rs.282.72 lakh) in 2015-16

towards ‘Coal Handling System’ (which form part of the original scope of work of the

project, but after the cut-off date) under Regulation 3(25) read with Regulation 8(3)

and Regulation 54 of the 2014 Tariff Regulations. The balance amount of Rs.84.81

lakh (Rs.367.53 lakh - Rs.282.72 lakh) is towards Stone Picking shed (for Rs.42.79

lakh), Fire Detection system (for Rs.21.04 lakh) and ‘Others’ (Rs.20.98 lakh). In

justification of the same, the Petitioner has submitted that the actual additional

expenditure incurred under ‘Coal Handling System’ package is Rs.1040 lakh in

2014-15 and Rs. 367.53 lakh in 2015-16. It has submitted that Rs.367.53 lakh

capitalised in 2015-16 mostly relates to the procurement of initial mandatory spares,

which was initiated and procured prior to the cut-off date (31.3.2015), while the

procurement of balance spares was concluded in 2015-16. Regulation 14(1)(3) of

2014 Tariff Regulations permits the capitalization of spares up to cut-off date, in

accordance with the provisions of Regulation 13 of the 2014 Tariff Regulations (4%

Order in Petition No. 408/GT/2020 Page 35 of 178

of Plant & Machinery cost as on the cut-off date). It is noticed that the claim of

Rs.282.72 lakh towards initial spares pertains to initial spares which form part of the

original scope of the Plant and Machinery. It is evident from the submissions of the

Petitioner, that the procurement of spares was initiated even before the cut-off date

(31.3.2015), but spares were received only during 2015-16. Since the claim of the

Petitioner for additional capitalisation of Rs.282.72 lakh in 2015-16 is towards initial

spares for ‘Coal Handling System’ after the cut-off date, the same is allowed in

relaxation of Regulation 14(1)(3) of 2014 Tariff Regulations. However, the balance

amount of Rs.84.81 lakh (Rs.42.79 lakh for Stone Picking shed, Rs.21.04 lakh for

Fire Detection system and Rs.20.98 lakh towards ‘Others’) have not been allowed as

the items do not form part of initial spares and no justification has also been

furnished by the Petitioner for capitalization after the cut-off date.

BTG & Spare GT

49. The Petitioner, in Petition No. 152/GT/2015, had claimed projected additional

capital expenditure of Rs.1616 lakh in 2015-16 towards BTG Package and the same

was not allowed by the Commission in its order dated 26.12.2017. The Petitioner, in

the present petition, has claimed actual additional capital expenditure of Rs.837.40

lakh for BTG package (including spares for Rs.777.30 lakh) and Rs.846.76 lakh for

Spare GT in 2015-16, Rs.1.78 lakh for BTG and Rs.35.73 lakh for Spare GT in 2016-

17, which are within the original scope of work of the project, but after the cut-off

date. The balance amount of Rs.60.10 lakh (₹837.40 - ₹777.30) under BTG package

apart from Spares is towards ‘Workshop equipment’ (Rs.23.83 lakh), ‘Mill hoist’

(Rs.15.23 lakh) and ‘Others’ (Rs.21.05 lakh). The Petitioner, in justification of the

said claim has submitted that the expenditure mainly relates to mandatory ‘Initial

capital spares’, which were required to be procured before the cut-off date

(31.3.2015). It has, however, submitted that due to their non-critical requirement for

Order in Petition No. 408/GT/2020 Page 36 of 178

purpose of COD, the procurement of most of these items was initiated prior to the

cut-off date from M/s BHEL, but their procurement was concluded in 2015-16.

Accordingly, the Petitioner has submitted that the additional capital expenditure falls

within the scope and ambit of Regulation 54 read with Regulation 8(3) and

Regulation 14(3) of the 2014 Tariff Regulations.

50. The Respondent, KSEBL has submitted that the Petitioner has not furnished

any details and justification for the claim and the same is not in line with Regulation

14(3) of the 2014 Tariff Regulations. It has further submitted that the BTG package

was capitalized after the cut-off date and is not allowable in terms of the regulations,

as the Petitioner has not furnished any valid reason for extension of procurement of

the same beyond the cut-off date. Accordingly, KSEBL has submitted that the claim

of the Petitioner may be disallowed. In response, the Petitioner has submitted that

the cut-off date of the generating station is 31.3.2015, which is within the first year

(2014-15) of the 2014-19 tariff period. The Petitioner has stated that the claim under

Regulation 14(3) is inadvertent and the same may be read as Regulation 14(2) of the

2014 Tariff Regulations. Accordingly, it has submitted that the claim is within the

original scope of work of the project. The Petitioner has further submitted that the

contractual liability was created in 2014-15, but was reflected in 2015-16 only after

supply of material was received, as in supply contracts liability is created

immediately upon execution of contract and recognition in books of accounts, only

after material is received along with bills. The Petitioner has also furnished the

details in Annexure P/12 of the petition. The Petitioner has contended that due to

force majeure condition, arising on account of multiple failures, the Petitioner had to

procure the assets, the process for which had started in 2014-15. It has also added

that initial spare GTs under contingency budget for deferred initial spares was

procured to sustain the unit operation during any future eventuality. Therefore, the

Order in Petition No. 408/GT/2020 Page 37 of 178

Petitioner has stated that the additional capital expenditure claimed falls within the

scope of Regulations 14(3)(iii) and 14(3)(v) read with Regulation 54 of the 2014

Tariff Regulations.

51. In addition, the Petitioner has submitted that for key initial spares, such as

BCW pump, journal shaft, workshop, IA compressor spare, High energy drain valve,

HP plunger pump, Mill hoist for Unit-2, Instrumentation capital spares and Spare GT,

the procurement of these spares were initiated prior to the cut-off date, but the OEM

could deliver these items only after the cut-off date. It has been stated that these

items are urgently required for the operation of the generating station and by

procurement of these spares after the cut-off date, no extra cost had occurred to the

beneficiaries. The Petitioner has further stated that in terms of Regulation 13 of the

2014 Tariff Regulations, the capitalisation of initial spares is limited to 4.0% of Plant

& Machinery cost up to cut-off date for coal-based/ lignite-fired thermal generating

stations. It has submitted that the total Plant & Machinery cost up to cut-off date is

Rs.2821.82 crore and in terms of Regulation 13 of the 2014 Tariff Regulations, the

amount of Initial spares to be capitalised is limited to Rs.112.87 crore i.e. (4% of

Rs.2821.82 crore). The Petitioner has pointed out that initial spares of Rs.71.64

crore, capitalised till 2013-14, were approved in the order dated 26.12.2017 in

Petition No. 152/GT/2015 and further, initial spares of Rs.14.83 crore and Rs.21.53

crore have been procured and capitalized under various packages during the years

2014-15 and 2015-16 respectively. The summary of initial capital spares, as

furnished by the Petitioner is as under:

(Rs. in crore)
Initial Spares Amount
Initial Spares supplied till 31.3.2014 (A) 71.64
Initial Spares supplied during 2014-15 (B) 14.83
Initial Spares supplied during 2015-16/ 2016-17 (C) *21.53
Total (A+B+C) 108.00
4% of P&M cost 112.87

Order in Petition No. 408/GT/2020 Page 38 of 178

 *including BTG spare of Rs.777.30 lakh and Spare GT of Rs.846.76 lakh

52. Thus, the total value of Initial spares procured till 2015-16 is Rs.108 crore

which is within the ceiling of Rs.112.87 crore i.e. (4% of Rs.2821.82 crore), specified

under Regulation 13 of the 2014 Tariff Regulations. The Petitioner has submitted

that it has procured initial spares as and when it was required and some spares were

procured in 2015-16, after cut-off date. Regulation 14(1)(3) of the 2014 Tariff

Regulations permits the capitalization of capital spares up to the cut-off date in

accordance with Regulation 13 of the 2014 Tariff Regulations (i.e. 4% of Plant &

Machinery cost as on the cut-off date). It is evident from the submissions of the

Petitioner that the initial spares form part of the original initial cost of the plant and

machinery. The procurement of spares was initiated before the cut-off date

(31.3.2015) but the OEM had delayed the delivery of the same. Since the Petitioner

is entitled for initial spares up to 4% of Plant and Machinery cost, we allow Rs.777.30

lakh towards initial spares of BTG package in exercise of the power to relax under

Regulation 54 of the 2014 Tariff Regulations. However, the amount of Rs.60.10 lakh

(Rs.837.40 - Rs.777.30) towards BTG package which include Workshop equipment

(Rs.23.83 lakh), Mill hoist (Rs.15.23 lakh) and for Others (Rs.21.05 lakh) during

2015-16 and Rs.1.78 lakh in 2016-17 have not been allowed as the capitalization

has occurred after the cut-off date and reasons furnished by the Petitioner do not

justify the capitalization of these assets after the cut-off date.

53. As regards claim of the Petitioner for additional capitalisation of Rs.846.76

lakh in 2015-16 and Rs 35.73 lakh in 2016-17 towards Spare GT, the Petitioner has

submitted that the same may be allowed as ‘replacement’ as the original Generator

Transformer (GT) procured prior to COD had failed and has been de-capitalized at

its gross value of Rs.1147.14 lakh in 2014-15. This submission of the Petitioner has

been verified from the list of assets de-capitalized in 2014-15 and it is noticed that

Order in Petition No. 408/GT/2020 Page 39 of 178

GT has been de-capitalized at the aforesaid gross value, which is more than the cost

of new GT (i.e. Rs.846.76 lakh). Accordingly, the additional expenditure of Rs.846.76

lakh in 2015-16 and Rs.35.73 lakh in 2016-17 towards Spare GT is allowed for the

purpose of tariff as ‘replacement’ since the gross value of the old asset has been de-

capitalized in terms of the provisions of Regulation 14(4) of the 2014 Tariff

Regulations.

Balance of Plant (BOP)

54. The Petitioner has claimed actual additional capital expenditure of Rs.445.57

lakh in 2015-16 and Rs.5.82 lakh in 2016-17 towards ‘BOP’ which form part of the

original scope of work of the project, but after the cut-off date. The claim of the

Petitioner for Rs.5.82 lakh in 2016-17 is under the head ‘Others’. In justification of

the said claim, the Petitioner has categorised the capitalization of this package in

2015-16, as under:

(Rs. in lakh)
Asset Description 2015-16
Condition Monitoring Instruments 207.20
Initial mandatory spares 185.10
Electrical System for Plant facilities 53.27
Total 445.57

55. The Respondent, KSEBL has submitted that the additional capitalization

claimed after the cut-off date may not be allowed. In response, the Petitioner has

submitted that the capitalization claimed under BOP package, beyond the cut-off

date, is mainly towards the procurement of condition monitoring equipment/ testing

instruments and initial spares. It has submitted that the procurement process was

initiated within the cut-off date and order was placed in March 2015/ early April 2015,

but the supply got concluded in 2015-16. The Petitioner has stated that the delay

was on account of multiple failure of the units during the years 2013-14 and 2014-15,

thereby delaying the initial stabilization of the units. It has added that on account of

Order in Petition No. 408/GT/2020 Page 40 of 178

this ‘force majeure’ condition, the additional capitalization falls under the purview of

Regulation 14(3)(v) read with Regulation 54 of the 2014 Tariff Regulations (Power to

relax). The Petitioner has further submitted that the additional capitalization for

assets which form part of the original scope of the project, but also have life of more

than one accounting period and is an integral part of the existing assets. Hence,

such expenditure incurred are capital in nature and are not charged to O&M

expenses in the books of accounts of the Petitioner.

56. We examine the claims of the Petitioner in following paragraphs.

(a) Condition Monitoring Instruments

57. The Petitioner has submitted that Regulation 46 of the Central Electricity

Authority (Technical Standards for Construction of Electrical Plants and Electric

Lines) Regulations, 2010 specifies standards for Condition Monitoring of Electrical

equipment. It has submitted that the procurement process of testing instruments was

initiated on 13.8.2014 (within the cut-off date) after finalizing the specifications and

the bidding process was initiated and Purchase order was issued to qualified

supplier on 6.4.2015. The equipment was procured in batches in order to lessen the

burden of cost in one year. The Petitioner has also submitted that major procurement

was done in 2015-16 for Rs.207.20 lakh and the remaining equipment were

purchased in 2016-17. The Petitioner has submitted that since the said expenditure

has been incurred in furtherance to the Regulations specified by CEA, the

expenditure incurred squarely falls within the scope of Regulation 14(3)(ii) of the

2014 Tariff Regulations.

58. We have considered the submissions of the Petitioner. Since the additional

capital expenditure for Rs.207.20 lakh for Condition Monitoring of Electrical

equipment has been incurred in compliance with the CEA (Technical Standards for

Order in Petition No. 408/GT/2020 Page 41 of 178

Construction of Electrical Plants and Electric Lines) Regulations, 2010, the same is

allowed to be capitalised under Regulation 14(3)(ii) of the 2014 Tariff Regulations.

(b) Initial mandatory spares

59. The Petitioner has claimed initial mandatory spares for Rs.185.10 lakh and

has stated that these mandatory spares were procured as and when they were

required and some spares were procured in 2015-16 i.e. after cut-off date. The

Petitioner has stated that the same is within the ceiling of initial spares as per the

provisions of the 2014 Tariff Regulations.

60. We have considered the submissions. The claim of the Petitioner for

Rs.185.10 lakh towards mandatory spares pertain to initial spares which form part of

the original scope of the Plant and Machinery. It is evident from the submissions of

the Petitioner that the procurement of the spares was initiated before the cut-off date

(31.3.2015), but were received only during 2015-16. Accordingly, the claim of the

Petitioner for additional capitalisation of Rs.185.10 lakh in 2015-16 towards initial

spares for ‘BOP spares’ after the cut-off date is allowed under Regulation 14(1)(3) of

2014 Tariff Regulations, in exercise of the power to relax.

(c) Electrical system for Plant facilities

61. The Petitioner has submitted that facilities like field hostel, gate house and

canteen were delayed due to land issues and local agitation as explained under

“General Civil Works” package. Hence, the capitalization of electrical system was

carried out in 2015-16 when these facilities where commissioned and an amount of

Rs.53.27 lakh was capitalized in 2015-16. The Petitioner has submitted that these

assets are within the original scope of work, but due to various force majeure

conditions faced by the Petitioner, the commissioning of such assets were delayed

and was finally completed beyond the cut-off date.

Order in Petition No. 408/GT/2020 Page 42 of 178

62. It is observed that the electrical system for facilities i.e. field hostel, gate

house and canteen, is consequential to ‘General Civil Works’ which were delayed

due to land non-availability and the same are for reasons beyond the control of the

Petitioner as discussed in paragraph 46 above. In this background, the additional

capitalization of Rs.53.27 lakh in 2015-16 pertaining to Electrical system for plant

facilities is allowed under Regulation 14(3)(i) of the 2014 Tariff Regulations. In

support of the claim for Rs.5.82 lakh during 2016-17, the Petitioner has submitted

that the amount corresponds to “Others” but has not mentioned the nature of items

capitalized and the necessity of such capitalization. In view of the above,

capitalization of Rs.5.82 lakh during 2016-17 is not allowed.

New Schemes in 2015-19

63. The Petitioner has also claimed additional capital expenditure for ‘New

Schemes’ in 2015-19, as follows, which do not form part of the original scope of work

of the project and which were taken up after the cut-off date:
(Rs in lakh)
Assets/Works 2015-16 2016-17 2017-18 2018-19
Fire Tender with shed 61.53 0.60 14.47 1.30
Fixed Foam system for LDO & HFO 60.74 - - -
NABL Accredited Lab 70.52 112.96 5.62 55.18
Online Effluent Monitoring System 13.95 - - -
IT & Others 10.97 61.01 125.62 134.55
Augmentation of Track Hopper shed 268.36 - -
MAX DCS version up-gradation (XP) 67.52 - 438.86
Unit-1
Construction of road in Ash area - 80.29 18.15 -
Installation of CAAQMS - 67.58 - -
Power supply redundancy and Re- - 401.59 - -
arrangement at BOP area
Gate house near JNT/security infra/e- - 45.07 98.58 257.66
security
Ash Bagging - 27.21 -
Augmentation of Store area - 31.74 7.58 171.16
Safety related expenditure - - 67.09 103.67
Augmentation of Fire detection system - - 80.41 -
Drinking Water System - - 10.07 13.16
Augmentation of Ash handling system - - 700.13 848.07
Fabrication of expansion bellow - - 49.69 23.34

Order in Petition No. 408/GT/2020 Page 43 of 178

 Labour colony - - 192.79 16.08
Refurbishment of DM Plant Piping and - - 31.98 -
Tank
Re-heater modification & MTM installation - - 160.29 78.23
Up-gradation of protection system - - 1.45 47.30
Yard sprinkling and Fire detection system - - - 18.91
in CHP
Coal pit run-off mechanized drainage - - - 321.88
system
Wind barrier in Ash Pond - - - 29.90
Total additional capitalization 553.59 828.05 2002.78 2120.39
Total additional capitalization claimed 554.59 829.06 2002.40 2119.96
as per Form 9A

(a) Fire Tender with shed

64. The Petitioner has claimed additional capitalization of Rs.61.53 lakh in 2015-

16, Rs.0.60 lakh in 2016-17, Rs.14.47 lakh in 2017-18 and Rs.1.30 lakh in 2018-19

for Fire tender with shed under Regulation 14(3)(ii) of the 2014 Tariff Regulations. In

justification for the same, the Petitioner has submitted that a fire station has been

commissioned near the DM plant with intent to cover the entire plant premises in the

eventuality of fire and, hence, the expenditure may be approved.

65. The Respondent, KSEBL has submitted that IS 3034 Standards were to be

followed by the Petitioner at the time of design of the generating station and should

have formed part of the original scope of work. The Respondent has stated that the

expenditure does not fall under ‘change in law’ and, therefore, should not be allowed

to be capitalized. In response, the Petitioner has submitted that after overcoming

stabilization issues of the units, which was of utmost priority, the Petitioner had

initially conducted audit/ review/ mock drills of the existing firefighting systems and

their compliance with IS standards/ CEA Regulations, 2010. After review of the

firefighting systems, it was observed that with the existing location of Fire Tender, it

was not possible to meet the response time of 5 minutes in case of fire at the Coal

Handling Plant area. The Petitioner has pointed out that the claim of NTPC towards

firefighting system was allowed by the Commission in its order dated 29.7.2016 in

Order in Petition No. 408/GT/2020 Page 44 of 178

Petition No. 293/GT/2014 (tariff of Talcher STPS, Stage-II for the 2014-19 tariff

period) subject to the report of CEA. Accordingly, the Petitioner has submitted that

the additional capital expenditure claimed may be allowed.

66. IS:3034 standard which deals with fire stations in Super Thermal Power

generating stations having installed capacity exceeding 1000 MW, stipulate the

following:

“(a) As per clause no 10.3.5 “Considering the large area of Super Thermal Power
Stations (Super Thermal/Power Stations Having Installed Capacity Exceeding 1 000
MW), facilitate quick turn out it may be necessary to deploy the operational
manpower at two Fire Stations — a Main Fire Station and a Sub Fire Station, both
having up-to-date communication facilities to help easy
mobilization in case of emergency.”

(b) As per clause no 10.4.1 “Power Stations authorized for full time Fire Brigades with
major firefighting appliances shall have well designed Fire Stations for housing
appliances and firefighting staff. They shall be so located that the response times for
fire appliances are kept to a minimum not to exceed 5 minutes.”

67. Thus, as per IS:3034 standard, the response time for reaching a fire prone

area should be limited to less than 5 minutes and, if necessary, an additional sub-fire

station is required to be made operational. The Petitioner has submitted that during

various mock drills conducted (as per the Factories Act, 1948), it took more than five

minutes to reach the premises of Coal Handling Plant (CHP) of the Petitioner, which

is a critical area to be protected from fire, as it is situated far away from the DM Plant

area. Hence, the need was felt by the Petitioner to set up another sub-fire station

near CHP area to be compliant with IS:3034 standard in order to avoid any

eventuality. Keeping in view that the expenditure incurred was in compliance with the

IS:3034 standard (which deals with “Fire Stations in Industrial Buildings’) and as the

same is required for the safety and security of the plant, the additional capital

expenditure incurred is allowed under Regulation 14(3)(ii) of the 2014 Tariff

Regulations.

Order in Petition No. 408/GT/2020 Page 45 of 178

(b) NABL accredited lab, Online Effluent Monitoring system, Installation of CAAQMS,
Yard sprinkling and Fire detection system, Wind barrier in Ash pond and
Construction of road in Ash area

68. The Petitioner has claimed additional capitalization of Rs.70.52 lakh in 2015-

16, Rs.112.96 lakh in 2016-17, Rs.5.62 lakh in 2017-18 and Rs.55.18 lakh in 2018-

19 for NABL accredited lab. It has also claimed additional capitalization of Rs.13.95

lakh for ‘Online Effluent monitoring system’ in 2015-16. The Petitioner has claimed

additional capitalization of Rs.80.29 lakh in 2016-17 and Rs.18.19 lakh in 2017-18

for Construction of road in Ash area and Rs.67.58 lakh for ‘Installation of CAAQMS’

in 2016-17. Also, additional capital expenditure of Rs.29.90 lakh for ‘Wind barrier in

Ash pond’ and Rs.18.91 lakh for ‘Yard sprinkling and Fire detection system’ in CHP

in 2018-19 has been claimed by the Petitioner. The Petitioner has submitted that

these expenditures have been incurred for various schemes which were to be

complied by the Petitioner based on the directions of the Jharkhand State Pollution

Control Board (JSPCB) and is, therefore, covered under Regulation 14(3)(ii) of the

2014 Tariff Regulations. It has stated that the sitting arrangement of the lab

technicians/ department was initially arranged in the adjoining space which was not

in compliance with ISO-17025 (NABL) and, accordingly, a separate sitting

arrangement was made to comply with the requirements of ISO-17025 for the lab

and to comply with the mandate of Jharkhand State Pollution Control Board (JSPCB)

and it being a governmental instrumentality, directions issued by it fall within the

scope and meaning of Regulation 14(3)(ii) of the 2014 Tariff Regulations i.e. change

in law or compliance of existing law. The Respondent, KSEBL has submitted that the

expenditure incurred for establishing additional vertical extension of DM plant lack

justification on perusal of the ‘Consent to Operate’ order and the same is not in line

with the aforesaid regulation.

Order in Petition No. 408/GT/2020 Page 46 of 178

69. The matter has been examined. The Petitioner in support of its claim for

additional capitalization of the schemes has furnished the correspondences made

with JSPCB with regard to the said schemes. The schemes executed by the

Petitioner are mainly to comply with the Pollution control norms and for maintaining

the environment standards as per directions of JSPCB. As the Petitioner has

incurred the aforesaid additional expenditure in respect of these assets/ works for

compliance with the directions of JSPCB, the same are allowed under Regulation

14(3)(ii) of the 2014 Tariff Regulations.

(c) IT & Others

70. The Petitioner has claimed additional capitalization of Rs.10.97 lakh in 2015-

16, Rs. 61.01 lakh in 2016-17, Rs.125.62 lakh in 2017-18 and Rs.134.55 lakh in

2018-19 for IT & others. The Petitioner, in justification of the same, has submitted

that it has incurred the expenditure for replacement of IT equipment, namely laptops,

computers, servers, printers, etc. and some other ‘minor assets’ which have been

fully depreciated in the books of accounts. The Petitioner has stated that in case the

generating station would have completed more than 10 years, the expenses on such

items would have been managed from the Compensation Allowance eligible in terms

of the 2014 Tariff Regulations. It has stated that the life of IT equipment is much less

than 10 years and needs to be replaced within the said period. Therefore, there is no

other means available with the Petitioner for meeting expenditure on these assets.

The Petitioner has sought additional capitalization of these assets by invoking

Regulation 54 of the 2014 Tariff Regulations and has submitted that the expenditure

needs to be allowed on the principles enshrined under Section 61 of the Electricity

Act, 2003. The Respondent, KSEBL has submitted that the additional capital

expenditure falls under R&M expenses and, therefore, the same may be disallowed.

Order in Petition No. 408/GT/2020 Page 47 of 178

71. The matter has been examined. Admittedly, the additional capital expenditure

claimed by the Petitioner is beyond the original scope of work of the project and is

after the cut-off date. In this regard, the proviso to Regulation 14(3) of the 2014 Tariff

Regulations provides the following:

“Provided that any expenditure on acquiring the minor items or the assets including
tools and tackles, furniture, air-conditioners, voltage stabilizers, refrigerators, coolers,
computers, fans, washing machines, heat convectors, mattresses, carpets etc. brought
after the cut-off date shall not be considered for additional capitalization for
determination of tariff w.e.f. 1.4.2014.”

72. In our considered view, the expenditure pertaining to IT equipment is in the

nature of ‘minor assets’ which has been incurred after the cut-off date. Hence, in

terms of the proviso to Regulation 14(3) of the 2014 Tariff Regulations, the additional

capitalization of the expenditure claimed is not allowed.

(d) Fixed foam system for LDO & HFO

73. The Petitioner has claimed additional capitalization of Rs.60.74 lakh in 2015-

16 for ‘Fixed foam system for LDO and HFO’ under Regulation 14(3)(ii) of the 2014

Tariff Regulations. The Petitioner has submitted that Foam flooding system at HFO

and LDO Tank is required as per clause no 5.3.5.2 of IS 3034 standards, which

stipulate as follows:

“5.3.5.2 The oil storage tanks should also have fixed foam fire extinguishing system in
conformity with IS 12835 (Part 1): 1989.”

74. The Petitioner has referred to IS 3034:1993 and IS 12835 (Part 1): 1989 and

has submitted that the additional expenditure incurred is for compliance with the

provisions of the said IS standards. Though these IS standards were in place at the

time of conceptualization of the generating station, since the additional capitalization

is for compliance with the existing law, we allow the additional capitalization of Rs.

60.74 lakh for ‘Fixed Foam system for LDO and HFO’ in 2015-16 under Regulation

14(3)(ii) of the 2014 Tariff Regulations.

Order in Petition No. 408/GT/2020 Page 48 of 178

(e) Augmentation of Track Hopper shed
75. The Petitioner has claimed additional capitalization of Rs.268.36 lakh in 2015-

16 towards ‘Augmentation of track hopper shed’. In justification of the same, the

Petitioner has submitted that originally, Track hopper was designed for direct

unloading of coal from BOBR (Bogie Open Bottom Rapid discharge Railway Wagon)

into track hopper. It has submitted that the track hopper shed was erected in 2012

with dimensions as per BOBR unloading requirements, but in the absence of rail

connectivity, coal is transported through road by Hyva (a vehicle by Tata Motors) and

is unloaded at coal bed/ ramp area or track hopper as per need and, thereafter,

excavators/ bulldozers push the coal into track hopper. The Petitioner has stated that

continuous movement of heavy vehicles for feeding coal into track hopper, coupled

with impact of large size stones in coal had considerably damaged the structure of

the Track hopper, which endangered the safety of personnel working there. It has

submitted that additional capital expenditure under this scheme was required to be

incurred due to unforeseen circumstances beyond the control of the Petitioner and

could not have been anticipated or avoided, through prudent utility practices.

Accordingly, the Petitioner has prayed that the Commission may allow the additional

capital expenditure under this scheme, in exercise of the power under Regulation 54

(Power to relax) read with Regulation 3(25) and Regulation 8(3) of the 2014 Tariff

Regulations. Alternatively, the Petitioner has submitted that the said expenditure is

covered under Regulation 14(3)(iii) of the 2014 Tariff Regulations.

76. The matter has been examined. Admittedly, the additional capital expenditure

claimed by the Petitioner is beyond the original scope of work of the project and is

after the cut-off date. The Petitioner’s submission that the additional capitalization

incurred is on account of ‘Force Majeure’ events and the same may be allowed in

Order in Petition No. 408/GT/2020 Page 49 of 178

exercise of the power to relax is not acceptable, as the submissions made by the

Petitioner do not demonstrate the existence of any ‘force majeure’ events.

Alternatively, the prayer of the Petitioner to allow the said claim under Regulation

14(3)(iii) of the 2014 Tariff Regulations is also not acceptable, as the Petitioner has

not furnished any documentary evidence indicating that the expenditure has been

incurred for higher security or safety of plant as advised or based on directions of the

Appropriate Governmental agencies or Statutory authorities responsible for national/

internal security. In view of this, the additional capitalization claimed by the Petitioner

under this head is not allowed.

(f) MAX DCS Version up-gradation (XP) Unit-1 (New schemes required on account
of obsolescence)

77. The Petitioner has claimed additional capitalization of Rs.67.52 lakh in 2015-

16 and Rs.438.86 lakh in 2017-18 for ‘MAX DCS version Up-gradation (XP) Unit-1’ in

exercise of the power to relax under Regulation 54 of the 2014 Tariff Regulations. In

justification of the same, the Petitioner has submitted the following:

(a) Digital Control System (DCS) is the automated intelligence of any thermal power
generating station. Windows XP operating system was the most popular and reliable
Windows platform provided by all leading industrial automation companies for their
control system. However, from 8.4.2014, Microsoft has completely withdrawn the
support for Windows XP Operating System. With end of support by Microsoft on
Windows XP operating system, it stopped developing Security Patches for Windows
XP, non-security hot fixes, online technical content updates and telephone support.
Hence, system was more vulnerable for malware attack and had become out-dated.

(b) The Petitioner managed the system with existing inventories and support from
BHEL till mid of 2016. However, after mid of 2016, M/s BHEL expressed its inability to
provide further support and recommended for complete up-gradation of existing DCS
to higher version of Windows Operating System with upgraded version of MAX DNA
DCS for Maithon Units to ensure services and necessary spares. Accordingly, MAX
DCS up-gradation for Unit-1 was taken up in 2017-18.

78. The Respondent, KSEBL has submitted that the additional capital expenditure

incurred is in the nature of R&M expenses and, hence, may not be allowed. In

response, the Petitioner has submitted that the expenditure has been incurred on

Order in Petition No. 408/GT/2020 Page 50 of 178

account of obsolescence and force majeure conditions which was not within the

control of the Petitioner. It has stated that though Microsoft had withdrawn its support

for Windows XP Operating System on 8.4.2014, the Petitioner with all its efforts and

existing inventory managed to maintain the system till 2016-17, but had to undertake

such replacements when M/s BHEL stopped extending its support after mid of 2016

and strongly recommended to upgrade to higher versions. The Petitioner has stated

that the same could not have been avoided and due to such uncontrollable factors, it

had to incur a one-time expenditure towards such up-gradation, and is in no way a

recurring expenditure that can be booked under R&M expenses.

79. The matter has been examined. The Petitioner has submitted that the Digital

Control System (DCS) has become obsolete as Microsoft had completely withdrawn

its support for Windows XP Operating System. Max DNA version 6.x.x on Windows 7

was envisaged to replace the earlier version i.e. Max DNA version 4.x.x on Windows

XP. The Petitioner has furnished the recommendations of OEM (M/s BHEL)

confirming that further sustenance of the system was not possible. Considering the

submissions of the Petitioner and the documents furnished and keeping in view that

the additional expenditure was incurred by the Petitioner under circumstances which

were beyond its control (on account of obsolescence of Windows XP for DCS), the

additional capital expenditure claimed is allowed, in relaxation of Regulation

14(3)(vii) of the 2014 Tariff Regulations.

(g) Gate House Near JNT/ Security infra/ E-security

80. The Petitioner has claimed additional capital expenditure of Rs.45.07 lakh in

2016-17, Rs.98.58 lakh in 2017-18 and Rs.257.66 lakh in 2018-19 under Regulation

54 (Power to relax) read with Regulation 14(3)(iii) of the 2014 Tariff Regulations for

construction of gate house near JNT equipped with turnstile gate and strengthening

Order in Petition No. 408/GT/2020 Page 51 of 178

of e-Security system for main gate, labour gate and the plant premises. In

justification of the said claim, the Petitioner has submitted that these works were

necessitated on account of increasing security incidents due to local agitations,

strikes, dharna and increasing instances of theft etc.. The Petitioner has also

submitted that the turnstile gates have dual authentication with access card as the

first and biometric as the other. It has further stated that Boom barriers, one for entry

road and one for exit road have been constructed and also RFID system has been

installed for automated gate operation.

81. The Respondent, KSEBL has submitted that expenditure claimed is covered

under the security expenses allowed to the Petitioner, over and above the normative

O&M expenses. In response, the Petitioner has submitted that the plant is spread

over 1116 acres of land and is situated in a region having less employment and is a

stronghold of Maoists, which poses a high security threat to the installations and

workforce of the plant. It has further submitted that since inception, it is continuously

facing a lot of law and order problems like agitation, gate jams, trespassing, thefts by

displaced persons, supported by political outfits and such facts had been observed

by the Intelligence Bureau, GOI in its report dated 10.1.2019. The Petitioner has

added that due to delay in the commissioning of Railway project, owing to Force

Majeure conditions, coal is transported through trucks (about 1200-1600 per day)

and the security staff had to oversee all these along with patrolling and monitoring

which was difficult for them and was prone to human error, due to fatigue.

82. The matter has been considered. Admittedly, the additional capital

expenditures claimed by the Petitioner is beyond the original scope of work of the

project and is after the cut-off date. The Petitioner’s submission that the additional

capitalization has been incurred is on account of Force Majeure events and the

Order in Petition No. 408/GT/2020 Page 52 of 178

same may be allowed in exercise of the power to relax is not acceptable, as the

submissions made by the Petitioner do not demonstrate the existence of any force

majeure events. Alternatively, the prayer of the Petitioner to allow the said claim

under Regulation 14(3)(iii) of the 2014 Tariff Regulations is also not acceptable, as

the Petitioner has not furnished any documentary evidence indicating that the

expenditure incurred is for higher security or safety of plant as advised or is based

on the directions of the Appropriate Governmental agencies or Statutory authorities

responsible for national/ internal security. In view of this, the additional capitalization

claimed by the Petitioner under this head is not allowed.

(h) Power Supply redundancy and re-arrangement at BOP area and Augmentation of
Store area

83. The Petitioner has claimed additional capital expenditure of Rs.401.59 lakh in

2016-17 for ‘Power Supply redundancy and re-arrangement at BOP area’ and

Rs.31.74 lakh in 2016-17, Rs.7.58 lakh in 2017-18 and Rs.171.16 lakh in 2018-19

towards ‘Augmentation of Store area’ under Regulation 3(25) read with Regulation

54 of the 2014 Tariff Regulations. In justification of the same, the petitioner has

submitted the following:

(i) Power Supply Redundancy and Re-arrangement at BOP area:

Frequent tripping of 11 kV CPS overhead line due to breaking of insulators and
other overhead line components due to storm and lightning were leading to
shutdown of essential load. Further, underground Cable fault of the single
source was leading to shutdown of supply of the vital load along approach road
for a longer time as it requires considerable time locating and repairing the
fault. Moreover, frequent disruption of lighting load and supply of Gate house
was becoming major concern of safety and security of the persons and the
plant. It was, therefore, decided to form a 6.6 kV Ring Mains Unit by sourcing of
2 numbers of 6.6 kV outgoing feeders from existing 6.6 kV ER #1 switchboard
to form a 6.6 kV network with low cost Compact Sub Stations at different load
centres to feed such critical loads.

(ii) Augmentation of Store area: In view of the increased Inventory levels in

volume and high value spares and to avoid damage of the equipment due to
bad weather/ temperature, the need for a sufficient and proper storage facility,

Order in Petition No. 408/GT/2020 Page 53 of 178

 both open and covered, equipped with additional racking/ handling
infrastructure was felt. Accordingly, the Petitioner has undertaken augmentation
of the store area which broadly includes (i) Concreting and securitization of
additional space admeasuring 200 m x 100 m for the purpose of storage of
material along with road and pathways, (ii) Development of shed of
specification 50 m x 100 m in the open yard of the existing store and (iii)
Installation of heavy duty racks and procurement of material handling machines
like forklift, crane etc.

84. The Respondent, KSEBL has submitted that expenditure incurred is as a

result of poor planning which is attributable to the Petitioner and, therefore, may not

be allowed and cannot also be classified as a force majeure event. In response, the

Petitioner has submitted that existing overhead line of 11 kV installed for the purpose

of construction supply was being utilized for supplying power to some of the

essential load like gate house complex, field hostel, site office, etc. It has stated that

with passage of time, tripping of these overhead lines had increased because of

failures of insulators, breaking of the conductor, damage on account of the

movement of coal trucks, which was initially not envisaged and was beyond the

control of the Petitioner. Accordingly, the Petitioner has submitted that the

expenditure may be allowed in exercise of the power under Regulation 54 or,

alternatively, under Regulation 14(3)(iii) of the 2014 Tariff Regulations.

85. The submissions have been considered. The Petitioner’s submission that the

additional capitalization incurred is on account of ‘Force Majeure’ events and, hence,

the same may be allowed in exercise of the power to relax is not acceptable, as the

submissions made by the Petitioner do not indicate the existence of any force

majeure events. In our view, the works executed by the Petitioner are only an

extension/ rearrangement of the existing system in the generating station.

Alternatively, the prayer of the Petitioner to allow the said claim under Regulation

14(3)(iii) of the 2014 Tariff Regulations is also not acceptable, as the Petitioner has

Order in Petition No. 408/GT/2020 Page 54 of 178

not furnished any documentary evidence indicating that the expenditure incurred is

for higher security or safety of plant as advised or is based on the directions of the

Appropriate Governmental agencies or Statutory authorities responsible for national/

internal security. In view of this, the additional capitalization claimed by the Petitioner

under this head is not allowed.

(i) Ash Bagging system

86. The Petitioner has claimed additional capital expenditure of Rs.27.21 lakh in

2016-17 for ‘Ash Bagging system’ under Regulation 3(25) read with Regulation 8(3)

and Regulation 54 of the 2014 Tariff Regulations. The Petitioner has submitted that

‘Ash bagging system’ has been installed to facilitate dry fly ash to be packed in the

bags directly from silo discharge points and, thereafter, dry fly ash filled in bags are

transported through rail/ trucks, for onward transportation and utilization. It has

submitted that additional capital expenditure of Rs.27.21 lakh has been incurred in

2016-17 for installation of ‘Ash bagging system’ to optimally utilize the fly ash and

was in compliance of with the directions of JSPCB vide notice dated 17.5.2013.

Accordingly, it has submitted that the additional capitalization may be allowed under

Regulations 14(3)(ii) and 14(3)(iii) read with Regulation 54 of the 2014 Tariff

Regulations.

87. The matter has been considered. The notice dated 17.5.2013 of JSPCB

indicates that the Petitioner is required to comply with the direction of the Board

regarding usage of 100% fly ash. As the additional expenditure incurred was in

compliance with the directions of JSPCB, which is a statutory authority, we allow the

additional capitalization claimed under Regulation 14(3)(iii) of the 2014 Tariff

Regulations.

(j) Up-gradation of RTU/Protection system

Order in Petition No. 408/GT/2020 Page 55 of 178

88. The Petitioner has claimed additional capitalization of Rs.1.45 lakh in 2017-18

and Rs.47.30 lakh in 2018-19 towards ‘Up-gradation of RTU/protection system’

under Regulation 14(3)(ii) of the 2014 Tariff Regulations. In justification of the same,

the Petitioner has submitted the following:

“(a) That the matter for Upgradation/replacement of old Remote Terminal Unit (RTU) in
Eastern Region for reporting of old RTU/Substation Automation System (SAS) to back
up control center over IEC 60870-5-104 has been discussed in a special Project
review meeting held on 14.2.2017 at Eastern Reginal Power Committee (ERPC), 35th
TCC/ERPC meeting held on 24th / 25th February 2017 and also in 19th SCADA O&M
meeting held on 7.4.2017. As advised by ERPC in 35th TCC/ERPC meeting, detailed
report has been finalized and approved in 36th TCC/ERPC board meeting held on
13th/ 14th September 2017 at Bhubaneshwar. In view of above direction of
ERLDC/ERPC, the Petitioner was mandated to upgrade the RTU system and seek
additional license from OEM for enabling existing RTUs for reporting over IEC 104
protocol to Main as well as back-up Control Centre of ERLDC. Therefore, the
Petitioner prays to the Commission to consider the circumstances as under
compliance of existing law and allow capitalization under this head. The expenditure
incurred therefore squarely falls within the scope of Regulation 14 (3)(ii) of 2014 Tariff
Regulations.”

89. Since the total additional capitalization of Rs.48.75 lakh (Rs.1.45 lakh and

Rs.47.30 lakh) for up-gradation of RTU or protection system has been based on

discussions in various ERPC meetings and has been incurred by the Petitioner in

compliance with the mandate of ERLDC/ERPC towards safety features of protection

system, we allow the same under Regulation 14 (3)(ii) of 2014 Tariff Regulations.

(k) Safety related expenditure

90. The Petitioner has claimed additional capitalization of Rs.67.09 lakh in 2017-

18 and Rs.103.67 lakh in 2018-19 for ‘Safety related expenditure’ (i.e. scaffolding for

Boiler, Insulated sky lift, construction of high-rise maintenance platform) under

Regulations 14(3)(iii) of 2014 Tariff Regulations. Regulation 14(3)(iii) of the 2014

Regulations provides for admissibility of expenditure for higher security and safety,

based on the advice of the Appropriate Government agency or statutory authorities

responsible for national/ internal security. As the Petitioner has not demonstrated

that the additional expenditure claimed is based on advice or direction of any

Order in Petition No. 408/GT/2020 Page 56 of 178

Governmental agency or statutory authorities, the additional capitalization of the

same is not allowed.

(l) Coal Pit Run-off mechanised Drainage system

91. The Petitioner has claimed additional capitalisation of Rs.321.88 lakh in 2018-

19 towards Coal Pit Run-off mechanised Drainage system, under Regulation 3(25)

read with Regulation 54 of the 2014 Tariff Regulations. In justification of the same,

the Petitioner has submitted the following:

(i) The three runoff pits near Stacker Reclaimer, track hopper and crusher house
are provided to store internal drainage. Any spill over from these pits are stored in
another runoff pit located near main entrance gate on the western side of the Plant.
Topography of the northern area outside and near the plant is such that runoff of this
area enters the plant campus, travels around 200 m inside plant and thereupon goes
outside the plant through western side of the Plant. During heavy rainy seasons, such
storm water enters the plant coal handling area carrying coal dust with it and gets
mixed with the runoff pit near gate. In an event of spill over due to flooding of pit, the
outflow of this pit crosses the Nirsa-Jamtara road through a culvert and finds its way to
Rani Talab due to natural slope of the area. The accumulation of the runoff water was
also causing failure of the wall. Many villagers started agitation on the belief that the
Petitioner is discharging contaminated process water from the plant to the outside
environment. Letter from village community leader to the Petitioner complaining
regarding discharge of contaminated water (which actually is rainwater) is annexed;
(ii) Based on the experience of flooding of the storm water drain with the coal
handling area runoff water during the monsoon season, the Petitioner reviewed the
existing drains to arrive at a long-term solution to avoid flooding under all rainfall
conditions. It was, therefore, decided that the storm water drains from outside plant
boundary be diverted along the northern boundary preventing mixing with the internal
drainage water or flooding the pit located near main entrance gate and ultimately to be
discharged into the culvert on Nirsa-Jamtara road beyond the boundary wall. This way
the excess water from outside the plant boundary will not flood the run-off pit 2 near
main gate and only clean water would be diverted outside the plant, which shall
address the concern raised by villagers as stated above. Accordingly, the scheme was
conceptualized and proper drainage system was constructed for its natural flow
without any contamination outside the plant. However, the construction work beyond
the Petitioner’s boundary was forcefully stopped by the local community and their
leaders as they were still of the belief that diverted water would be/may be
contaminated, through an agitation on 18.6.2018 disrupting plant operation and supply
of coal. A True Copy of newspaper cutting in this regard is annexed;

(iii) Though all the efforts have been made by the Petitioner to explain the local
community leaders, but the Petitioner was not permitted to carry out the work of
extending the drainage system into the culvert on Nirsa-Jamtara Road. Accordingly,
the Petitioner vide its Letter dated 17.8.2018 apprised Sub-Divisional Officer (SDO)
Dhanbad about the Scheme undertaken for addressing the concern raised by
neighbouring community, however, due to agitation by the community leaders on
18.6.2018 the same was stopped. In view of above developments, it was, therefore,
further decided to have alternative disposal methodology for the coal area runoff water
during the monsoon season. Under this Project, it has been decided to divert the

Order in Petition No. 408/GT/2020 Page 57 of 178

 excess water into Ash Pond through pumping and piping arrangement and containing
the coal dust mixed run-off water within Coal Storage area;
(iv) Pursuant to the above, the Petitioner had to mandatorily undertake following
works addressing the concerns of villagers for the reasons beyond the control of itself
as under:

(a) Construction of the drainage system for natural flow of storm water entering
through northern area near the plant and preventing it from mixing with the
contaminated water;

(b) To divert Coal run off disposal into Ash pond (during monsoon season)
through a pumping and piping arrangement;

(c) To contain the coal dust mixed run off water within coal storage area.

92. The Petitioner has submitted that the additional capital expenditure claimed

was incurred due to circumstances, which were unforeseen and beyond the control

of the Petitioner and the same was neither anticipated nor could have been avoided

through any prudent utility practice. Accordingly, the Petitioner has prayed that the

Commission may allow the additional capital expenditure under this scheme in

exercise of the power under Regulation 54 of the 2014 Tariff Regulations. The

Petitioner has also submitted that in addition to the additional expenditure incurred

for 2018-19 as above, an expenditure of Rs.400 lakh for balance work is envisaged

to be taken up during 2019-20.

93. The Respondent, KSEBL has submitted that the expenditure incurred by the

Petitioner is due to poor planning and is, therefore, attributable to the Petitioner. It

has also stated that claim is not in line with provisions of the 2014 Tariff Regulations

and is not on account of any force majeure event. The Petitioner in its rejoinder has

submitted that the storm water used to mix with coal dust and run-off pit near the

gate and in event of flooding of the pit, the outflow of this used to flow in the Rani

Talab due to natural slope of the area leading to widespread resistance from the

villagers along with their political leaders. Accordingly, the Petitioner has submitted

Order in Petition No. 408/GT/2020 Page 58 of 178

that due to unforeseen circumstances, the expenditure incurred may be allowed in

terms of Regulation 54 of the 2014 Tariff Regulations.

94. The matter has been examined. It is observed from the submissions and the

documents enclosed that the Petitioner was required to undertake the construction of

the drainage system, in order to address the concerns of the neighbouring

community as the contaminated storm water from the plant area during monsoon

season was overflowing to the natural reservoir (Rani Talab) located in a nearby

village. The correspondence made with the community representatives, Sub-

Divisional Officer (“SDO”) Dhanbad and newspapers cuttings furnished by the

Petitioner indicate that the expenditure incurred was necessary due to unforeseen

conditions, which could not be apprehended during the construction stage of the

plant. We note that Regulation 3(25) of the 2014 Tariff Regulations defines ‘Force

Majeure’ conditions which prevent the timely completion of the project and as such,

the expenditure is not covered under Regulation 3(25) as the plant is in operational

stage. However, considering the fact that the said expenditure was necessitated to

due to unforeseen circumstances, we allow the additional capitalisation of Rs 321.88

lakh under Regulation 14(3)(ii) of the 2014 Tariff Regulations.

(m) Augmentation of Ash handling system

95. The Petitioner has claimed additional capitalisation of Rs.700.13 lakh in 2017-

18 and Rs.848.07 lakh in 2018-19 towards ‘Augmentation of Ash handling system’

under Regulation 3(25) read with Regulation 54 of the 2014 Tariff Regulations. The

Petitioner has also submitted that the additional expenditure claimed is covered

within the scope of Regulation 14(3)(ii) of the 2014 Tariff Regulations. The Petitioner

has submitted that the additional capitalization claimed is beyond the original scope

of work of the project and has been incurred due to “force majeure” events which

Order in Petition No. 408/GT/2020 Page 59 of 178

were beyond the control of the Petitioner. In justification of the same, the Petitioner

has submitted the following:

a) The Petitioner has been facing acute operational and maintenance issues
in its ‘Ash handling system’, primarily on account of combined effect of (i)
significantly higher volume of ash generated than design capacity (ii) higher
ash particle size and bulk density compared to design and (iii) Lower GCV
leading to higher quantity of coal consumption and in turn increasing the
effect of (i) and (ii) above.

b) The problems are mainly attributable to the poor quality of the coal received
from various sources of Central Coalfield Limited and its subsidiaries. The
coal received at the plant contains much higher ash than anticipated since
its inception.

c) High quantity and coarser quality of ash posed pressure on the existing ash
disposal system in proper handling of both fly ash and bottom ash leading
to frequent leakages in ash conveying pipelines, thereby causing higher
dust in environment and faster filling of limited capacity ash pond. In fact,
there were specific directions from JSPCB for reduction of fugitive dust
around ash pond and fly ash silo area in their letter dated 5.07.2016.

96. In view of the above submissions and since the additional capital expenditure

incurred is based on the directions of JSPCB vide its letter dated 5.7.2016, the

additional capital expenditure claimed is allowed under Regulation 14(3)(ii) of the

2014 Tariff Regulations.

(n) Drinking Water Facility

97. The Petitioner has claimed additional capitalization of Rs.10.07 lakh in 2017-

18 and Rs.13.16 lakh in 2018-19 towards ‘Drinking water facility’ under Regulation

14(3)(ii) of the 2014 Tariff Regulations. In justification of the same, the Petitioner has

submitted that Chapter III Section 41(d) of the Bihar Factories Rules, 1950 read with

the Factories Act, 1948, as adopted by the State of Jharkhand, requires that ‘the

number of water centres to be provided shall be one ‘centre’ for every 150 persons

employed at any one time in the factory’. According to this Rule, the number of

drinking water centre should be one, for every 150 persons employed at any given

time in the factory. The Petitioner has submitted that since many of the worker’s

Order in Petition No. 408/GT/2020 Page 60 of 178

areas are widespread in the generating station, the number of workers in high

concentration areas were more than ‘150 per centre’ unless the workers travel to

farther water centres. Therefore, the Petitioner has submitted that in order to reduce

the overall travel time and in order to comply with the said Rule, it was decided to

add drinking water facilities in three additional locations of the plant area viz., CHP

area, Ash pond area and Coal weighbridge, which was concentrated with maximum

number of workers. According to the Petitioner, since the additional expenditure

incurred was in compliance of an existing law, the additional expenditure may be

allowed to be capitalized in terms of Regulation 14(3)(ii) of the 2014 Tariff

Regulations.

98. In consideration of the submissions of the Petitioner and keeping in view that

the said additional expenditure incurred is for compliance with the provisions of the

existing law i.e. the Bihar Factory Rules, 1950, we allow the additional capitalization

claimed under Regulation 14(3)(ii) of the 2014 Tariff Regulations.

(o) Other Schemes

99. The Petitioner has also claimed additional capitalization of Rs.49.69 lakh in

2017-18 and Rs.23.34 lakh in 2018-19 for Fabrication of expansion bellow,

Rs.192.79 lakh in 2017-18 and Rs.16.08 lakh in 2018-19 for Labour Colony,

Rs.160.29 lakh in 2017-18 and Rs.78.23 lakh in 2018-19 for Re-heater Modification

& MTM installation, Rs.80.41 lakh in 2017-18 for ‘Augmentation of Fire detection

system’ and Rs.31.98 lakh in 2017-18 for ‘Refurbishment of DM Plant Piping and

Tank’. The Petitioner has claimed additional capitalization of the expenditure

incurred on the ground of force majeure events and has accordingly prayed that the

claim may be allowed under Regulation 3(25) read with Regulation 54 of the 2014

Tariff Regulations.

Order in Petition No. 408/GT/2020 Page 61 of 178

 100. The matter has been examined. Admittedly, the claim of the Petitioner for

additional capital expenditure is in respect of the assets/ works which do not form

part of the original scope of work of the project and is after the cut-off date. It is

observed that the works executed by the Petitioner are related to extension/ re-

arrangement/ replacement of the existing systems in the generating station. The

Petitioner has also not justified the nature of the ‘force majeure’ events which

necessitated the additional expenditure being incurred on these assets/ works. In

view of this, we find no reason to exercise the power to relax the provisions of the

2014 Tariff Regulations. Accordingly, the additional capital expenditure claimed

under this head is not allowed.

Additional Capital Expenditure allowed

101. In view of the above discussions, the actual additional capital expenditure

allowed for the 2014-19 tariff period is as under:

(Rs. in lakh)
Sl. Package Name 2014-15 2015-16 2016-17 2017-18 2018-19
No.
1 BTG 730.69 777.30 0.00 0.00 0.00
2 Cost of Land and Site 21142.23 69.98 0.40 0.00 2112.86
3 General Civil Works 10577.92 791.99 184.39 154.47 147.49
4 Plant Water System 252.36 0.00 0.00 0.00 0.00
5 Ash Handling System 48.65 26.23 0.00 0.00 0.00
6 Coal Handling System 1042.53 282.72 0.00 0.00 0.00
7 Balance of Plant 18.21 445.57 0.00 0.00 0.00
8 Township & Colony 57.12 43.38 0.00 0.00 0.00
9 Pre-Operative expenses 207.87 0.00 0.00 0.00 0.00
10 IT system for Software & 457.52 0.00 0.00 0.00 0.00
Hardware
11 RO system 0.00 7798.20 (-) 28.04 57.38 0.00
12 Fire Tender with shed 0.00 61.53 0.60 14.47 1.30
13 Fixed Foam System for LDO & 0.00 60.74 0.00 0.00 0.00
HFO
14 Construction of Road in Ash 0.00 0.00 80.29 18.15 0.00
area
15 NABL Accredited Lab 0.00 70.52 112.96 5.62 55.18
16 Yard Sprinkling & Fire 0.00 0.00 0.00 0.00 18.91
detection system in CHP
17 Up-gradation of Protection 0.00 0.00 0.00 1.45 47.30
System

Order in Petition No. 408/GT/2020 Page 62 of 178

Sl. Package Name 2014-15 2015-16 2016-17 2017-18 2018-19
No.
18 Wind barrier in Ash Pond 0.00 0.00 0.00 0.00 29.90
19 Installation of CAAQMS 0.00 0.00 67.58 0.00 0.00
20 Online effluent monitoring 0.00 13.95 0.00 0.00 0.00
system
21 Augmentation of ash handling 0.00 0.00 0.00 700.13 848.07
system
22 Ash bagging system 0.00 0.00 27.21 0.00 0.00
23 MAX DCS Version up- 0.00 67.52 0.00 438.86 0.00
gradation (XP) Unit 1
24 Drinking water facility 0.00 0.00 0.00 10.07 13.16
25 Spare GT 0.00 846.76 35.73 0.00 0.00
26 Coal Pit run-off drainage 0.00 0.00 0.00 0.00 321.88
system
27 IDC in the above 144.82 349.53 0.00 0.00 0.00
A Total additional 34679.91 11705.92 481.12 1400.60 3596.05
capitalization allowed

102. The Petitioner has included IDC capitalized in books, excluding Railways, in

the additional capitalization as per Form 9A. However, the same has been deducted

by the Petitioner in Form 1(I) while claiming capital cost for tariff.

103. Accordingly, the net additional capitalization allowed after considering the de-

capitalization/ deduction and before adjustment of liabilities and IDC as per books, is

as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
A Total additions allowed 34679.91 11705.92 481.12 1400.60 3596.05
B Less: De-capitalization allowed 3214.56 131.14 69.61 132.63 81.37
C Less: De- capitalization not 0.00 96.56 192.54 717.48 350.46
performed in books.
D Less: Cash capitalization 5506.76 0.00 0.00 0.00 0.00
towards land
E Total Deductions 8721.32 227.70 262.15 850.11 431.83
F Net additional capitalization 25958.59 11478.22 218.97 550.49 3164.22
allowed before adjustment
of liabilities and IDC as per
books (A-E)

104. The net additional capital expenditure allowed after adjustment of un-

discharged liabilities is as under:

Order in Petition No. 408/GT/2020 Page 63 of 178

 (Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Net additional capitalization 25958.59 11478.22 218.97 550.49 3164.22
allowed
Less: Un-discharged liabilities 391.10 71.03 163.06 0.00 0.00
(pertaining to additional capitalization
allowed)
Net additional capitalization 25567.49 11407.19 55.91 550.49 3164.22
allowed on cash basis

Normative IDC on excess equity and on actual loan

105. The Petitioner, vide Form-1 of the petition, has claimed the following amounts

of normative Interest during Construction (IDC) on excess equity and on actual loan

in respect of additional capital expenditure for the 2014-19 tariff period:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19 Total
Normative IDC on excess 62.39 199.52 41.00 192.37 429.04 924.32
equity
Normative IDC on actual loan 2672.02 485.50 69.39 200.82 230.48 3658.21

106. As regards allowance of IDC, Regulation 11 of the 2014 Tariff Regulations

provide as below:

“11. Interest during construction (IDC), Incidental Expenditure during Construction

(IEDC)
(A) Interest during Construction (IDC):
(1) Interest during construction shall be computed corresponding to the loan from the
date of infusion of debt fund, and after taking into account the prudent phasing of funds
up to SCOD.
(2) In case of additional costs on account of IDC due to delay in achieving the SCOD,
the generating company or the transmission licensee as the case may be, shall be
required to furnish detailed justifications with supporting documents for such delay
including prudent phasing of funds:
Provided that if the delay is not attributable to the generating company or the
transmission licensee as the case may be, and is due to uncontrollable factors as
specified in Regulation 12 of these regulations, IDC may be allowed after due
prudence check:
Provided further that only IDC on actual loan may be allowed beyond the SCOD to the
extent, the delay is found beyond the control of generating company or the
transmission licensee, as the case may be, after due prudence and taking into account
prudent phasing of funds.”

Normative IDC on Additional Capitalization

Order in Petition No. 408/GT/2020 Page 64 of 178

107. The Petitioner has submitted that normative IDC may be allowed in terms of

the judgment of APTEL dated 3.10.2019 in Appeal No. 231/2017 (Power links

Transmission Limited V CERC & ors). The Petitioner has submitted that the entire

expenditure on additional capitalization has been incurred from internal resources/

equity and no actual loan was/is proposed to be taken for such expenditure. Since

70% of such internal funds, which are in excess of 30% normative equity, are treated

as normative loan for the purpose of tariff determination under the 2014 and 2019

Tariff Regulations, interest on excess over 30% out of total internal funds before

capitalisation needs to be treated as normative IDC and added to cash to arrive at

the additional capitalisation for purpose of tariff.

108. It is observed that the Commission in its order dated 20.4.2017 in Petition No.

514/TT/2014 (Powerlinks Transmission Ltd v PGCIL & ors) had disallowed normative

IDC on additional capitalisation done through internal resources. Aggrieved by the

disallowance of normative IDC, Powerlinks Transmission Ltd. had filed Appeal No.

231 of 2017 before the Appellate Tribunal for Electricity (in short ‘APTEL’) with the

prayer to allow normative IDC on normative loan, considered for funding the

additional capitalization for the 2014-19 tariff period. APTEL vide its judgment dated

3.10.2019 held as follows:

“8 (ix) The Central Commission should have taken into consideration the aspect that
whatever be the types of funds it is never free of cost. There is always a cost of
funding. The argument that no actual loan for additional capital expenditure was
taken and therefore it is not admissible for any normative IDC is wrong. It is the
commercial decision of the Appellant whether to borrow the money from the market
for the purpose of additional capitalisation or use its internal accruals. In either case,
the capitalisation deserves to be given the Interest During Construction. For the
simple reasons that if the internal accruals were not to be used as additional capital
than it would have been invested in the market in any interest earning instrument.
Additional capitalisation is therefore entitled to be compensated in terms of normative
IDC. The Central Commission should have considered this aspect that no funds are
free funds.”

Order in Petition No. 408/GT/2020 Page 65 of 178

109. The Petitioner, in the present petition, based on the aforesaid decision of

APTEL in Powerlinks case, has computed the normative IDC on 70% of the average

funds deployed during the year for the additional capitalization claimed. The

Petitioner has furnished the computation of normative IDC as follows:

a) Computation of Capital Works in Progress (CWIP) Schedule during

the year:

i. The Petitioner has first computed the opening and closing amounts of
Capital Works In Progress (CWIP) actually incurred in cash (cash CWIP)
by subtracting Un-discharged liabilities from CWIP amounts on
corresponding dates. Similarly, cash additional capitalization has been
simply referred to as additional capitalization for this purpose.

ii. Since the closing amount of CWIP during a financial year is obtained after
subtracting additional capitalisation during the year, CWIP schedule
during the year is considered as the sum of CWIP schedule obtained by
opening and closing amounts of CWIP and that for additional
capitalisation;

iii. While CWIP schedule obtained by opening and closing amounts of CWIP
is assumed to increase or decrease linearly from opening to closing
amounts, the CWIP schedule for additional capitalisation is assumed to
increase linearly from zero in the beginning to the amount of additional
capitalisation in the mid of the year;

iv. The said assumption is based on the fact that the Commission considers
average of opening and closing GFA i.e. additional capitalisation at the
mid of the year, for the purposes of computing equity, loan and
depreciation. Hence, for capitalisation to take place in mid of the year,
entire CWIP for that capitalisation must have been incurred up to mid of
the year.

b) Computation of normative IDC on normative loan used in CWIP

schedule:

i. Average CWIP has been obtained as sum of (a) average of opening and
closing CWIP for entire year (opening CWIP + closing CWIP)/2 and (b)

Order in Petition No. 408/GT/2020 Page 66 of 178

 average of additional capitalisation up to mid-year (0+additional
capitalisation)/4.

ii. The Petitioner has then considered excess equity of CWIP in a financial
year as the normative loan during that year and normative IDC has been
computed on average normative loan at Weighted Average Rate of
Interest on long term loan for that year;

iii. Therefore, total normative IDC has been computed as sum of IDC on
excess equity of average additional capitalisation and IDC on excess
equity of average of opening and closing amounts of CWIP.

c) Computation of IDC Capitalized

i. Since CWIP is assumed to be capitalised in the mid of the year, a part of

normative IDC up to mid of the year has been capitalised depending upon
the amount of additional capitalisation out of total CWIP in the mid of the
year and balance normative IDC during the year is carried forward to the
next year:
ii. For the purpose of capitalisation of IDC, it is assumed that CWIP incurred
first would be capitalised first. Hence, once the opening CWIP increases
to the value of additional capitalisation during the year, IDC related to this
CWIP up to half year is capitalised and balance is carried forward:

iii. In case, the opening CWIP is more than additional capitalisation during
the year, additional capitalisation is done from the opening CWIP and
normative IDC to be capitalised for half year would be 70% x additional
capitalisation x 0.5:

110. The Petitioner has prayed for approval of the above methodology for

computation of normative IDC and to include the same in the additional capitalization

of various assets capitalized during the 2014-19 period and projected to be

capitalized during the 2019-24 period. The Petitioner has also submitted the

normative IDC computation and the management certificate on the amounts of

CWIP.

Order in Petition No. 408/GT/2020 Page 67 of 178

111. We have considered the submissions of the Petitioner. It is noticed that the

Petitioner has neither submitted the normative IDC, duly certified by Auditors, nor the

date of infusion of funds, the corresponding dates of capitalisation, the applicable

interest rates etc. and their supporting documents, if any. Hence, in the absence of

the aforesaid information, we have worked out the normative IDC based on

assumptions as follows:

a. Infusion of funds has been assumed to be at the beginning of the year of

additional capital expenditure incurred;

b. Date of capitalisation has been assumed to be at the mid of the year; and
c. Weighted Average Rate of Interest (WAROI) on actual loan of respective
years have been applied for calculation of normative IDC of respective years

112. The normative IDC on additional capital expenditure has been worked out by

applying WAROI on actual loan of the particular year on the average normative loan

for the respective year, applied for half of the year of the time span. Accordingly, the

normative IDC on additional capital expenditure is as follows:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
760.89 221.46 9.60 24.59 55.34

Discharge of liabilities

113. The Petitioner has claimed discharge of liabilities for the 2014-19 tariff period

in Form 18, as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
4589.39 319.17 (-) 107.27 179.21 0.00

114. In compliance to the directions of the Commission vide ROP of the hearing

dated 2.6.2020, the Petitioner vide affidavit dated 20.6.2020, has furnished the

statement of reconciliation, with regard to un-discharged liabilities for each year and

the balance sheet of the respective years duly certified by Auditor.

Order in Petition No. 408/GT/2020 Page 68 of 178

 115. The Petitioner, in Form 1(I) has mentioned the additional capitalization on

accrual basis, instead of cash basis. In Form 18 (Liability flow statement) also, the

Petitioner has indicated the discharge of liabilities, as net of additions. However,

since the additional capitalization is allowed on cash basis, the liabilities included in

the additional capital expenditure as per Form 9A, has been deducted from the

amounts, on accrual basis. Similarly, the discharge of liabilities (without additions in

liabilities) have been worked out on the basis of the information furnished in Form 9A

and Form 18 and allowed as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Opening un-discharged liabilities as
4980.50 391.10 71.03 162.07 0.00
per Form 1(I) and Form 18
Add: Additions as per Form-9A 391.10 71.03 163.06 0.00 0.00
Less: Closing un-discharged liabilities
391.10 71.03 162.07 0.00 0.00
as per Form 1(I) and Form 18
Discharge of liabilities allowed 4980.50 391.10 72.03 162.07 0.00

Capital cost for the 2014-19 tariff period

116. Based on the above, the capital cost allowed for the 2014-19 tariff period is

summarized as under.

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Opening capital cost 432039.88 463204.76 474874.98 475012.53 475749.68
Add: Net additional
capitalisation allowed 25567.49 11407.19 55.91 550.49 3164.22
on cash basis
Add: Discharges
4980.50 391.10 72.03 162.07 0.00
allowed
Normative IDC allowed 760.89 221.46 9.60 24.59 55.34
Less: IDC Capitalised
in Books excluding 144.00 349.53 0.00 0.00 0.00
Railways
Closing capital cost 463204.76 474874.98 475012.53 475749.68 478969.24

Debt-Equity Ratio

117. Regulation 19 of the 2014 Tariff Regulations provides as under:

“(1) For a project declared under commercial operation on or after 1.4.2014 the debt
equity ratio would be considered as 70:30 as on COD. If the equity actually deployed

Order in Petition No. 408/GT/2020 Page 69 of 178

 is more than 30% of the capital cost equity in excess of 30% shall be treated as
normative loan:
Provided that:
(i) where equity actually deployed is less than 30% of the capital cost actual equity
shall be considered for determination of tariff:
(ii) the equity invested in foreign currency shall be designated in Indian rupees on
the date of each investment:
(iii) any grant obtained for the execution of the project shall not be considered as a
part of capital structure for the purpose of debt-equity ratio.
Explanation - The premium if any raised by the generating company or the
transmission licensee as the case may be while issuing share capital and investment
of internal resources created out of its free reserve for the funding of the project shall
be reckoned as paid up capital for the purpose of computing return on equity only if
such premium amount and internal resources are actually utilised for meeting the
capital expenditure of the generating station or the transmission system.
(2) The generating Company or the transmission licensee shall submit the resolution
of the Board of the company or approval from Cabinet Committee on Economic
Affairs (CCEA) regarding infusion of fund from internal resources in support of the
utilization made or proposed to be made to meet the capital expenditure of the
generating station or the transmission system including communication system as
the case may be.
(3) In case of the generating station and the transmission system including
communication system declared under commercial operation prior to 1.4.2014 debt
equity ratio allowed by the Commission for determination of tariff for the period
ending 31.3.2014 shall be considered.
(4) In case of generating station and the transmission system including
communication system declared under commercial operation prior to 1.4.2014 but
where debt: equity ratio has not been determined by the Commission for
determination of tariff for the period ending 31.3.2014 the Commission shall approve
the debt: equity ratio based on actual information provided by the generating
company or the transmission licensee as the case may be.
(5) Any expenditure incurred or projected to be incurred on or after 1.4.2014 as may
be admitted by the Commission as additional capital expenditure for determination of
tariff and renovation and modernization expenditure for life extension shall be
serviced in the manner specified in clause (1) of this regulation.”

118. Accordingly, the debt-equity ratio of 70:30 has been considered for the

purpose of tariff, in terms of Regulation 19 of the 2014 Tariff Regulations.

Additional Tax on Income due to adoption of Indian Accounting Standards (Ind

AS)

119. The Petitioner has also claimed additional tax arisen on account of

amendments in the Finance Act, 2017 to be recovered separately over and above

the annual fixed charges as per the ‘Change in law’ provisions. In this regard, the

Petitioner has stated the following:

Order in Petition No. 408/GT/2020 Page 70 of 178

 “…… in addition to existing provisions for computation of book profit, for Ind AS
compliant companies on which MAT is applicable, including the Petitioner, the book
profit was required to be further increased or decreased in following manner:
(i) By an amount credited or debited to other comprehensive income (“OCI”) in the
statement of profit and loss under the head “items that will not be re-classified to profit
or loss; and
(ii) By one-fifth of the transition amount for year of convergence i.e. FY 2016-17 and
the subsequent four years i.e. FY 2017-21. Transition amount has been defined as the
amount or the aggregate of the amounts adjusted in the other equity (excluding capital
reserve and securities premium reserve) on the convergence date.

The above enactments/ amendments in the Income Tax Act squarely fall under the
ambit of Change in Law as per Regulation 3 (9)(a) and (b) and are required to be
factored in the True-up of Annual Fixed Charges for the tariff period FY 2014-19 as per
Regulation 8(5)(ii) of CERC Tariff Regulations 2014 being a totally uncontrollable factor
and beyond the control of the Petitioner. Similar provisions also exist in CERC Tariff
Regulations 2019 and, hence, same relief is available to the Petitioner during the tariff
period 2019-24. In case of the Petitioner, MAT has been applicable during FY 2014-19
and is also expected to be applicable during FY 2019-24 and the book profit and tax
liability thereon has increased due to the said Change in Law. Thus, the Petitioner is
entitled to recovery of Additional Tax payable due to this Change in Law for the
applicable FYs 2016-17, 2017-18, 2018-19 in the tariff period FY 2014-19 and for FYs
2019-20 and 2020-21 in the tariff period FY 2019-24. Accordingly, it is humbly
submitted to the Hon’ble Commission to kindly consider the following
enactments/amendments as Change in Law under the CERC Tariff Regulations 2014:
a. the notification of Companies (Indian Accounting Standards) Rules, 2015 and
b. amendment of Section 115JB of the Income tax Act, 1961 under Finance Act, 2017
in order to incorporate provisions w.r.t Ind AS compliant companies

Further, as the basic principle of Change in Law is the principle of restitution i.e. to
bring back the Petitioner to same economic position as it would have been had
Change in Law not taken place, the Petitioner proposes to recover this additional tax
separately over and above the Annual Fixed Charges as per the provisions of the
regulations other than Change in Law provisions and not as part of Annual Fixed
Charges. This will also avoid unwarranted increase in Interest on Working Capital that
are linked to Annual Fixed Charges. However, since this additional tax recovery adds
to book profit and attracts further tax on it, the net recovery would not fully compensate
the Petitioner for increased tax. Therefore, in order to place the Petitioner back to the
same economic position, this additional tax recovery needs to be grossed up by the
applicable MAT rate for the relevant year and allowed to be recovered separately from
the beneficiaries.”

120. We have examined the matter. As regards the recovery of additional tax

liability due to implementation of Ind-AS, it is observed that the 2014 Tariff

Regulations provide for tax recovery by way of grossing up of Return on Equity with

the effective tax rate or Minimum Alternate Tax (MAT) in case of a generating

company or a transmission licensee, as the case may be, paying MAT of the

respective financial year. Further, no income, other than generation/ transmission

Order in Petition No. 408/GT/2020 Page 71 of 178

activities is considered for the purpose of tax recovery. In the present case, ROE is

being allowed for grossing up with the MAT rate, as envisaged under the provisions

of the 2014 Tariff Regulations. It is further observed that the implementation of Ind-

AS has an accounting treatment implication and does not result in income from

generation business activity. Accordingly, the prayer of the Petitioner to allow the

recovery of additional tax liability on the increased income, due to implementation of

Ind-AS is not permitted.

Return on Equity

121. Regulations 24 and 25 of the 2014 Tariff Regulations provide as under:

“24. Return on Equity:

(1) Return on equity shall be computed in rupee terms on the equity base determined
in accordance with regulation 19.
(2) Return on equity shall be computed at the base rate of 15.50% for thermal
generating stations transmission system including communication system and run of
river hydro generating station and at the base rate of 16.50% for the storage type
hydro generating stations including pumped storage hydro generating stations and
run of river generating station with pondage: Provided that:
(i) in case of projects commissioned on or after 1st April 2014 an additional return of
0.50% shall be allowed if such projects are completed within the timeline specified in
Appendix-I:
(ii) the additional return of 0.5% shall not be admissible if the project is not completed
within the timeline specified above for reasons whatsoever:
(iii) additional ROE of 0.50% may be allowed if any element of the transmission
project is completed within the specified timeline and it is certified by the Regional
Power Committee / National Power Committee that commissioning of the particular
element will benefit the system operation in the regional/national grid:
(iv) the rate of return of a new project shall be reduced by 1% for such period as may
be decided by the Commission if the generating station or transmission system is
found to be declared under commercial operation without commissioning any of the
Restricted Governor Mode Operation (RGMO) / Free Governor Mode Operation
(FGMO) data telemetry communication system up to load dispatch centre or
protection system:
(v) as and when any of the above requirement are found lacking in a generating
station based on the report submitted by the respective RLDC ROE shall be reduced
by 1% for the period for which the deficiency continues: (vi) additional ROE shall not
be admissible for transmission line having length of less than 50 kilometres.”

25. Tax on Return on Equity:

(1) The base rate of return on equity as allowed by the Commission under Regulation
24 shall be grossed up with the effective tax rate of the respective financial year. For
this purpose the effective tax rate shall be considered on the basis of actual tax paid
in the respect of the financial year in line with the provisions of the relevant Finance
Acts by the concerned generating company or the transmission licensee as the case

Order in Petition No. 408/GT/2020 Page 72 of 178

 may be. The actual tax income on other income stream (i.e. income of non-
generation or non-transmission business as the case may be) shall not be
considered for the calculation of “effective tax rate”.
(2) Rate of return on equity shall be rounded off to three decimal places and shall be
computed as per the formula given below:
Rate of pre-tax return on equity = Base rate / (1-t) Where “t” is the effective tax rate in
accordance with Clause (1) of this regulation and shall be calculated at the beginning
of every financial year based on the estimated profit and tax to be paid estimated in
line with the provisions of the relevant Finance Act applicable for that financial year to
the company on pro-rata basis by excluding the income of non-generation or non-
transmission business as the case may be and the corresponding tax thereon. In
case of generating company or transmission licensee paying Minimum Alternate Tax
(MAT) “t” shall be considered as MAT rate including surcharge and cess.
Illustration.
(i) In case of the generating company or the transmission licensee paying Minimum
Alternate Tax (MAT) @ 20.96% including surcharge and cess: Rate of return on
equity = 15.50/(1-0.2096) = 19.610%
(ii) In case of generating company or the transmission licensee paying normal
corporate tax including surcharge and cess:
(a)Estimated Gross Income from generation or transmission business for FY
2014-15 is Rs 1000 crore.
(b)Estimated Advance Tax for the year on above is Rs 240 crore.
(c) Effective Tax Rate for the year 2014-15 = Rs 240 Crore/Rs 1000 Crore =
24%
(d)Rate of return on equity = 15.50/ (1-0.24) = 20.395%

(3) The generating company or the transmission licensee as the case may be shall
true up the grossed up rate of return on equity at the end of every financial year
based on actual tax paid together with any additional tax demand including interest
thereon duly adjusted for any refund of tax including interest received from the
income tax authorities pertaining to the tariff period 2014-15 to 2018-19 on actual
gross income of any financial year. However, penalty if any arising on account of
delay in deposit or short deposit of tax amount shall not be claimed by the generating
company or the transmission licensee as the case may be. Any under-recovery or
over recovery of grossed up rate on return on equity after truing up shall be
recovered or refunded to beneficiaries or the long-term transmission customers/DICs
as the case may be on year to year basis.”

122. The Commission in its order dated 1.10.2019 in Petition No.152/GT/2015 had

allowed the normative equity of Rs.129747.21 lakh as on 31.3.2014. However, as

only the capital cost of Rs.432039.88 lakh as on 1.4.2014 has been allowed as

against the capital cost of Rs.432490.69 lakh allowed vide Commission’s order dated

1.10.2019 in Petition No.152/GT/2015, the opening equity has also been adjusted to

Rs.129611.96 lakh for the 2014-19 tariff period. The Petitioner has claimed MAT

Order in Petition No. 408/GT/2020 Page 73 of 178

rates for the respective financial years for grossing up of ROE and the same has

been considered for the purpose of tariff. Accordingly, ROE has been worked out

and allowed as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Gross Notional Equity 129611.96 138961.43 142462.50 142503.76 142724.90
Addition due to
9349.47 3501.07 41.26 221.15 965.87
Additional Capitalization
Closing Equity 138961.43 142462.50 142503.76 142724.90 143690.77
Average Equity 134286.70 140711.96 142483.13 142614.33 143207.84
Return on Equity
15.500% 15.500% 15.500% 15.500% 15.500%
(Base Rate )
Tax rate for the year 20.9605% 21.3416% 21.3416% 21.3416% 21.5488%
Rate of Return on
19.610% 19.705% 19.705% 19.705% 19.758%
Equity (Pre Tax )
Return on Equity 26333.62 27727.29 28076.30 28102.15 28295.00

Interest on loan

123. Regulation 26 of the 2014 Tariff Regulations provides as under:

“26. Interest on loan capital:

(1) The loans arrived at in the manner indicated in regulation 19 shall be considered
as gross normative loan for calculation of interest on loan.
(2) The normative loan outstanding as on 1.4.2014 shall be worked out by deducting
the cumulative repayment as admitted by the Commission up to 31.3.2014 from the
gross normative loan.
(3) The repayment for each of the year of the tariff period 2014-19 shall be deemed
to be equal to the depreciation allowed for the corresponding year/period. In case of
de-capitalization of assets the repayment shall be adjusted by taking into account
cumulative repayment on a pro rata basis and the adjustment should not exceed
cumulative depreciation recovered upto the date of de-capitalization of such asset.
(4) Notwithstanding any moratorium period availed by the generating company or the
transmission licensee as the case may be the repayment of loan shall be considered
from the first year of commercial operation of the project and shall be equal to the
depreciation allowed for the year or part of the year.
(5) The rate of interest shall be the weighted average rate of interest calculated on
the basis of the actual loan portfolio after providing appropriate accounting
adjustment for interest capitalized:
Provided that if there is no actual loan for a particular year but normative loan is still
outstanding the last available weighted average rate of interest shall be considered:
Provided further that if the generating station or the transmission system as the case
may be does not have actual loan then the weighted average rate of interest of the
generating company or the transmission licensee as a whole shall be considered.
(6) The interest on loan shall be calculated on the normative average loan of the year
by applying the weighted average rate of interest.
(7) The generating company or the transmission licensee as the case may be shall
make every effort to re-finance the loan as long as it results in net savings on interest

Order in Petition No. 408/GT/2020 Page 74 of 178

 and in that event the costs associated with such re-financing shall be borne by the
beneficiaries and the net savings shall be shared between the beneficiaries and the
generating company or the transmission licensee as the case may be in the ratio of
2:1.
(8) The changes to the terms and conditions of the loans shall be reflected from the
date of such re-financing.
(9) In case of dispute any of the parties may make an application in accordance with
the Central Electricity Regulatory Commission (Conduct of Business) Regulations
1999 as amended from time to time including statutory re-enactment thereof for
settlement of the dispute:
Provided that the beneficiaries or the long term transmission customers /DICs shall
not withhold any payment on account of the interest claimed by the generating
company or the transmission licensee during the pendency of any dispute arising out
of re-financing of loan.

124. The Petitioner has re-financed the long-term loan to reduce the interest

burden on the beneficiaries. For the purpose of calculation of interest on normative

loan, the Petitioner has considered interest rate of original loan, and not the new rate

after refinancing. The Petitioner has submitted that in case of refinancing, the

application of Regulation 26(5) of the 2014 Tariff Regulations would require the

computation of ‘weighted average rate of interest’ using the actual loan portfolio/

schedule, along with interest rate that would have been applicable for original loan

term. In our view, Regulation 26(5) of the 2014 Tariff Regulations provides that the

weighted average rate should be calculated on the basis of actual loan portfolio,

which implies the consideration of the ‘existing loan’ portfolio. As such, the applicable

rate is the rate after such refinancing of loan. This was decided by the Commission

while working out the interest on normative loan in order dated 26.12.2017 in Petition

No.152/GT/2015 and subsequently in Commission’s order dated 25.4.2019 in

Petition No.16/RP/2018 filed by the Petitioner. Accordingly, the weighted average

rate of interest (based on the rates as applicable before re-financing) as claimed by

the Petitioner, is not allowed. The Petitioner, in compliance with the directions of the

Commission vide ROP dated 2.6.2020, has, vide affidavit dated 20.6.2020,

submitted revised Form-13, furnishing calculation of weighted average rate of

Order in Petition No. 408/GT/2020 Page 75 of 178

 interest on actual loans at refinanced rates and the same has been considered for

computation of interest on normative loan. Accordingly, Interest on loan has been

worked out as mentioned below:

i) Since the capital cost of Rs.432039.88 lakh as on 1.4.2014 is allowed as

against the capital cost of Rs.432490.69 lakh allowed vide Commission’s order
dated 1.10.2019 in Petition No. 152/GT/2015, the adjusted gross normative
loan amounting to Rs.302427.92 lakh has been considered as on 1.4.2014.

ii) The adjusted cumulative repayment of Rs.47164.35 lakh as on 31.3.2014 as

has been considered as on 1.4.2014.

iii) Accordingly, the net normative opening loan as on 1.4.2014 works out to Rs.
255263.57 lakh;

iv) Addition to the normative loan on account of additional capital expenditure

approved above has also been considered;

v) The depreciation allowed has been considered as repayment of normative

loan during the respective year of the 2014-19 period. Further, the repayments
have been adjusted for de-capitalization of assets considered for the purpose of
tariff;

125. Necessary calculations for interest on loan are as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Gross Notional loan 302427.92 324243.34 332412.49 332508.77 333024.77
Cumulative Repayment of
47164.35 69464.84 93120.51 117005.07 140722.28
Loan up to previous year
Net Opening loan 255263.57 254778.50 239291.98 215503.70 192302.49
Addition due to additional
21815.42 8169.15 96.28 516.01 2253.69
capitalisation
Repayment of loan during 22785.93 23700.34 23949.17 23969.12 24160.20
the period
Less: Repayment
adjustment on account of 485.44 44.67 64.61 251.90 148.66
de-capitalization
Net Repayment 22300.49 23655.67 23884.56 23717.21 24011.55
Net Closing loan 254778.50 239291.98 215503.70 192302.49 170544.64
Average loan 255021.03 247035.24 227397.84 203903.10 181423.57
Weighted Average Rate of 10.96% 10.46% 9.92% 8.99% 8.79%
Interest on loan
Interest on loan 27957.86 25842.46 22561.92 18331.74 15953.23

126. The Petitioner has refinanced the loan which has resulted in substantial

benefits to the respondents on account of lower interest rates. The costs associated

Order in Petition No. 408/GT/2020 Page 76 of 178

with such re-financing shall be borne by the beneficiaries and the benefits of

refinancing shall be calculated and shared between the beneficiaries and petitioner

in the ratio of 2:1 in terms of Regulations 26(7), 26(8) and 26(9) of the 2014 Tariff

Regulations.

Depreciation

127. Regulation 27 of the 2014 Tariff Regulations provides as under:

“27. Depreciation:
(1) Depreciation shall be computed from the date of commercial operation of a
generating station or unit thereof or a transmission system including communication
system or element thereof. In case of the tariff of all the units of a generating station
or all elements of a transmission system including communication system for which a
single tariff needs to be determined the depreciation shall be computed from the
effective date of commercial operation of the generating station or the transmission
system taking into consideration the depreciation of individual units or elements
thereof.
Provided that effective date of commercial operation shall be worked out by
considering the actual date of commercial operation and installed capacity of all the
units of the generating station or capital cost of all elements of the transmission
system for which single tariff needs to be determined.
(2) The value base for the purpose of depreciation shall be the capital cost of the
asset admitted by the Commission. In case of multiple units of a generating station or
multiple elements of transmission system weighted average life for the generating
station of the transmission system shall be applied. Depreciation shall be chargeable
from the first year of commercial operation. In case of commercial operation of the
asset for part of the year depreciation shall be charged on pro rata basis.
(3) The salvage value of the asset shall be considered as 10% and depreciation shall
be allowed up to maximum of 90% of the capital cost of the asset:

Provided that in case of hydro generating station the salvage value shall be as
provided in the agreement signed by the developers with the State Government for
development of the Plant:
Provided further that the capital cost of the assets of the hydro generating station for
the purpose of computation of depreciated value shall correspond to the percentage
of sale of electricity under long-term power purchase agreement at regulated tariff:
Provided also that any depreciation disallowed on account of lower availability of the
generating station or generating unit or transmission system as the case may be
shall not be allowed to be recovered at a later stage during the useful life and the
extended life.
(4) Land other than the land held under lease and the land for reservoir in case of
hydro generating station shall not be a depreciable asset and its cost shall be
excluded from the capital cost while computing depreciable value of the asset.

Order in Petition No. 408/GT/2020 Page 77 of 178

 (5) Depreciation shall be calculated annually based on Straight Line Method and at
rates specified in Appendix-II to these regulations for the assets of the generating
station and transmission system:
Provided that the remaining depreciable value as on 31st March of the year closing
after a period of 12 years from the effective date of commercial operation of the
station shall be spread over the balance useful life of the assets.
(6) In case of the existing projects the balance depreciable value as on 1.4.2014 shall
be worked out by deducting the cumulative depreciation as admitted by the
Commission up to 31.3.2014 from the gross depreciable value of the assets.
(7) The generating company or the transmission license as the case may be shall
submit the details of proposed capital expenditure during the fag end of the project
(five years before the useful life) along with justification and proposed life extension.
The Commission based on prudence check of such submissions shall approve the
depreciation on capital expenditure during the fag end of the project.
(8) In case of de-capitalization of assets in respect of generating station or unit
thereof or transmission system or element thereof the cumulative depreciation shall
be adjusted by taking into account the depreciation recovered in tariff by the de-
capitalized asset during its useful services.”

128. As regards the weighted average rate of depreciation used for the

computation of the depreciation claimed, the Petitioner has submitted that the same

has been considered based on the actual depreciation provided in books of

accounts. The Petitioner has further submitted that as per accounting policy of the

Petitioner, depreciation on fixed assets is provided on pro rata basis from the month

in which the asset is available for use, on straight line method, at the rate and

methodology notified in the 2014 Tariff Regulations, except in case of following

assets, based on estimated useful life of the asset:

Asset Class Rate as notified by Rate in Books

Commission (%)
Land under lease 3.34% 4%
Computer and accessories 15% 16.21%
Motor vehicles 9.50% 19%
Software 15% Over the useful life or five
years, whichever is lower
Assets costing Rs.5000 or less 5.28% Fully depreciated in the year of
individually and mobile hand sets acquisition

129. The Petitioner has submitted that in pursuance of Ind-AS 17 (which is

applicable to Petitioner from 2016-17 with comparative period of one year viz. 2015-

16), the leasehold land, which was earlier considered as part of the gross block and

Order in Petition No. 408/GT/2020 Page 78 of 178

thereby depreciated/ amortized, would now be treated as part of ‘current assets’ and

amortized over the license period. In this context, adjustment to this extent is made

in the books of accounts. The Petitioner has submitted that though the 2014 Tariff

Regulations provide for specific depreciation rate for lease-hold land, consequent

upon adoption of Ind-AS by the Petitioner, the treatment of leasehold land has

changed in the books of accounts. Therefore, the Petitioner, in the present petition,

has claimed depreciation against leasehold land, based on the actual amortization

charged in the books of accounts.

130. The matter has been examined. It is observed that the Petitioner has claimed

depreciation based on the weighted average rate of depreciation, as per the books of

accounts. In terms of Regulation 27(5) of the 2014 Tariff Regulations, the rates

specified in Appendix-II to the said regulations, in respect of the assets of the

generating station are required to be used for arriving at the weighted average rate

of depreciation. Accordingly, the weighted average rate of depreciation as claimed

by the Petitioner has not been considered and the rates specified in Appendix-II of

the 2014 Tariff Regulations have been considered for the computation of

depreciation. Thus, the weighted average rate of depreciation claimed by the

Petitioner vis-à-vis allowed in terms of said regulations is tabulated below:

2014-15 2015-16 2016-17 2017-18 2018-19

Weighted Average Rate of
5.11% 5.13% 5.11% 5.08% 5.11%
Depreciation claimed
Weighted Average Rate of
5.09% 5.05% 5.04% 5.04% 5.06%
Depreciation allowed

131. Accordingly, depreciation allowed for the 2014-19 tariff period is as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Opening Gross Block
432039.88 463204.76 474874.98 475012.53 475749.68
(A)
Addition due to
Additional 31164.88 11670.22 137.54 737.15 3219.56
Capitalisation (B)

Order in Petition No. 408/GT/2020 Page 79 of 178

 Closing Gross Block
463204.76 474874.98 475012.53 475749.68 478969.24
(C)
Average Gross Block
447622.32 469039.87 474943.76 475381.10 477359.46
D=(A+C)/2
Value of Freehold Land
included in gross block 8635.47 17305.94 17340.93 17341.13 17427.23
(E)
Depreciation value
395088.16 406560.54 411842.55 412235.98 413939.00
F= (D-E) x 90%
Remaining depreciable
value (G=F-
Cumulative
347923.82 337095.70 318722.04 295230.91 273216.72
Depreciation (as shown
under ‘M’) at the end of
previous year)
No. of completed years
at the beginning of the 2.58 3.58 4.58 5.58 6.58
year (H)
Balance Useful life at
the beginning of the 22.42 21.42 20.42 19.42 18.42
Year (I)
Rate of Depreciation
(J) as per Annexure-I 5.09% 5.05% 5.04% 5.04% 5.06%
to this order
Depreciation (K) 22785.93 23700.34 23949.17 23969.12 24160.20
Cumulative
depreciation (at the
end of the period) (L=
69950.28 93165.18 117069.68 140974.19 164882.48
K + Cumulative
depreciation at the end
of previous year*)
Less: Depreciation
adjustment on account 485.44 44.67 64.61 251.90 148.66
of de-capitalization (M)
Cumulative depreciation
after adjustment due to
de-capitalization (at the 69464.84 93120.51 117005.07 140722.28 164733.83
end of the period)
(N=L-M)*
* Note: The Cumulative Depreciation at the end of 2013-14 is Rs. 47164.35 lakh.

Unrecovered Depreciation on De-capitalisation

132. The Petitioner has submitted that in the events where de-capitalization of

assets have to be carried out in the initial years of useful life of assets, there would

be significant loan outstanding on account of such assets which will necessarily have

to be serviced till end of loan tenure. It has stated that post de-capitalization, since

neither depreciation nor interest is available on such assets, the actual loan

outstanding for such assets will have to be serviced from revenue allowed for

Order in Petition No. 408/GT/2020 Page 80 of 178

meeting other expenses. This, according to the Petitioner, leads to financial hardship

and under-recovery, as it falls short of the revenue required for meeting expenses

which are already approved by the Commission. The Petitioner has also submitted

that the circumstances which lead to such shortfall are entirely beyond the control of

the Petitioner and for force majeure conditions. The Petitioner has further submitted

that as per Ind AS 16, along with de-recognition/ de-capitalization of replaced assets,

the Petitioner is required to book the gain or loss arising out of de-recognition in its

accounts. The Petitioner has added that while the 2014 Tariff Regulations and the

2019 Tariff Regulations provide for de-capitalization of replaced assets, there is no

corresponding regulation for considering the gain or loss due to such replacement for

not recovering the normative depreciation @90%. In view of the above, the Petitioner

has requested that the Commission may allow the recovery of unrecovered

depreciation i.e. allowed depreciation (90% of the Asset value-Depreciation

recovered till date of de-capitalization) to compensate for the losses which it may

incur in books of accounts, in exercise of the ‘Power to Relax’ and ‘Power to Remove

Difficulty’ under the 2014 Tariff Regulations. The Petitioner has also proposed to

separately recover the losses towards unrecovered depreciation as additional

depreciation, over and above the specified norms under the 2014 Tariff Regulations.

The claim of the Petitioner for unrecovered depreciation during the 2014-19 tariff

period is as under:

(Rs. in lakh)
2015 2016 2017 2018 2019 Total
160.00 137.00 158.00 482.00 213.00 1150.00

133. We have examined the matter. It is observed that the 2014 Tariff Regulations

provides for servicing of the funds infused in the admitted capitalised expenditure, by

way of allowing ROE and Interest on loan capital as components of the annual fixed

charges for the assets put in use. The equity and loan component for this purpose

Order in Petition No. 408/GT/2020 Page 81 of 178

are determined in accordance with Regulation 19 of the 2014 Tariff Regulations.

Thus, the said regulation provides for servicing the debt capital in the form of

‘Interest on loan’ on the amount of loan arrived at, by applying the debt-equity ratio

on the capital cost allowed and not on the ‘actual loan’ being serviced through tariff.

The capital cost has been allowed after necessary adjustment for the

decapitalisation of the asset. Apart from deduction in the cumulative depreciation,

corresponding cumulative repayment of loan is also brought down. Hence, in case of

repayment of loan, instead of the ‘actual loan repayment’, the depreciation allowed

for the corresponding year/ period is considered as repayment of loan and the same

is in line with Regulation 26(3) of the 2014 Tariff Regulations, which is extracted

below:

“26(3) The repayment for each of the year of the tariff period 2014-19 shall be deemed
to be equal to the depreciation allowed for the corresponding year/ period.”

134. Accordingly, the prayer of the Petitioner to allow the recovery of unrecovered

depreciation (in respect of assets not in use) is not allowed as the same is not in

conformity with the provisions of the 2014 Tariff Regulations.

O & M Expenses

135. The total O&M expenses claimed by the Petitioner for the 2014-19 tariff period

is as under:

(Rs. in lakh)
Items / Heads 2014-15 2015-16 2016-17 2017-18 2018-19
Normative O&M expenses as 16800.00 17860.50 18984.00 20181.00 21451.50
per Regulation 29(1)(a) of the
2014 Tariff Regulations
Water charges as per 946.18 996.05 993.31 965.52 930.54
Regulation 29(2) of the
2014 Tariff Regulations
Capital spares as per 0.00 0.00 58.34 53.52 10.45
Regulation 29(2)
Rental &Conveyance 100.35 76.08 57.61 74.98 51.19
expenses in lieu of 2nd
township
Total O&M Expenses 17846.53 18932.63 20093.26 21275.02 22443.68

Order in Petition No. 408/GT/2020 Page 82 of 178

136. The normative O&M expenses claimed by the Petitioner under Regulation

29(1)(a) of the 2014 Tariff Regulations are the same as allowed vide order dated

26.12.2017 in Petition No.152/GT/2015. Accordingly, the normative O&M expenses

claimed by the Petitioner in terms of Regulation 29(1)(a) of the 2014 Tariff

Regulations is allowed.

Water Charges

137. Regulation 29(2) of the 2014 Tariff Regulations provides as under:

“29(2) Operation and Maintenance Expenses

(2) The Water Charges and capital spares for thermal generating stations shall be
allowed separately:
Provided that water charges shall be allowed based on water consumption
depending upon type of plant, type of cooling water system etc., subject to prudence
check. The details regarding the same shall be furnished along with the petition:
Provided that the generating station shall submit the details of year wise actual
capital spares consumed at the time of truing up with appropriate justification for
incurring the same and substantiating that the same is not funded through
compensatory allowance or special allowance or claimed as a part of additional
capitalisation or consumption of stores and spares and renovation and
modernization.”

138. The Commission, in order dated 26.12.2017 in Petition No. 152/GT/2015, had

allowed Water charges under Regulation 29(2) of the 2014 Tariff Regulations, based

on the audited actual water charges incurred for 2014-15 as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
946.18 946.18 946.18 946.18 946.18

139. The Petitioner, in this petition, has claimed water charges based on the

audited actual water charges for the 2014-19 tariff period, in terms of Regulation

29(1)(b) of the 2014 Tariff Regulations. The Petitioner has furnished the details of

actual water consumption, water charge rates and water cess for each year. The

water charges claimed are as under:

Order in Petition No. 408/GT/2020 Page 83 of 178

 (Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
946.18 996.05 993.31 965.52 930.54

140. As stated, the Water charges allowed vide order dated 26.12.2017 in Petition

No.152/GT/2015 were based on the water charges incurred for 2014-15 and the

same was subject to revision, at the time of truing up of tariff, based on the actual

water charges paid by the Petitioner for the 2014-19 tariff period. The Petitioner has

claimed water charges, duly audited, based on actual water consumption.

Accordingly, on prudence check, the water charges claimed is allowed.

Capital Spares

141. As regards the claim of the Petitioner for ‘capital spares’ in terms of

Regulation 29(2) of the 2014 Tariff Regulations, the Commission, in order dated

26.12.2017 in Petition No.152/GT/2015 had observed that the claim of the Petitioner,

if any, would be considered on merits, on prudence check, at the time of truing-up of

tariff. The Petitioner, in the present petition, has claimed the following capital spares,

based on audited actual capital spares consumed during the 2014-19 tariff period:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Spare Circuit Breaker for MV & 0.00 0.00 18.96 0.00 7.18
LV Switchgear (BTG & main)
Spare Motors for 0.00 0.00 39.38 16.36 0.90
(BTG, RWP & AHP)
TDBFP Recirculation valve 0.00 0.00 0.00 27.61 2.37
Boiler Tubes 0.00 0.00 0.00 9.55 0.00
Total 0.00 0.00 58.34 53.52 10.45

142. In support of the said claim, the Petitioner has submitted the following:

(a) Spare Circuit Breaker for MV & LV Switch gear (BTG & main)
Spare Circuit Breaker for MV & LV switch gear was needed to be procured for
running the plant without any generation loss or to minimize the duration of
generation loss in case of any breakdown. Since these circuit breakers have a lead
time of delivery, the same is needed to be procured and maintained as capital
spares. While procurement of these spares, it was found that GE has stopped
manufacturing these circuit breakers, hence, different make compatible circuit
breaker was procured as spare. The capital expenditure for Spare Circuit Breaker for

Order in Petition No. 408/GT/2020 Page 84 of 178

 MV & LV Switch gear (BTG & main) may be approved by the Commission, as capital
spare in terms of the2014 Tariff Regulations.

(b) Spare Motors (comprising of 500 KW Motor for Raw Water Pump, 500 KW
Motor for Conveying Air Compressor for Ash Handling Plant, 350 KW Motor for
Auxiliary Cooling Water pump):
As per existing configuration, 3 number of raw water pump motors, 6 number of
conveying air compressor motors for ash evacuation and 4 No of auxiliary cooling
water pump motors are in service. These are critical 6.6 KV motors and were not
having initial spares. Hence, new spare motors were procured and are used on
rotation basis to overhaul present motors in case of any breakdown. For overhauling,
these motors are required to be sent to vendor facilities as overhauling within the
Plant was not so effective. In view of foregoing, procurement of above motors was
carried out. The capital expenditure for these Spare Motors, therefore, may kindly be
approved by the Commission as Capital Spare in terms of the 2014 Tariff
Regulations.

(c) TDBFP Re-circulation valve

Recirculation Valve (RCV) is an integral part of the Boiler Feed Pump. This is an
ON/OFF type Valve and it operates depending on the suction flow of the Boiler Feed
Pump. Opening of RCV is very much critical during initial start-up for maintaining
minimum flow requirement of BFP and during emergencies to avoid churning and
damage of pump internals. After few years, it was observed that the RCVs are
passing feed water during shut-off condition (i.e. during normal operation). The rate
of passing gradually increased and reached up to 300 TPH in a Unit. Initially, the
passing could be controlled by repairing the Valve internals which could sustain only
4-6 months. Repeated damage of Valve Seat, Plug & Stack caused frequent outage
of BFP. Meanwhile, matter was also taken up with M/s Dresser India (OEM) for
analysis and recommendation. According to manufacturer's analysis, the damage is
due to high throttling pressure at the tip of the Valve Seat & Plug for which the
existing Diaphragm-type Actuator is not able to shut-off 100% during normal
operation of the Units and is thereby causing passing of feed water. M/s Dresser,
therefore, suggested for changing the single acting Diaphragm-type Actuator to
double acting Piston Actuator. Recommendation of M/s Dresser is annexed.
Pursuant to above in FY 18, two RCVs were procured as Capital Spare which were
subsequently consumed in Unit 1. Depending on the performance, balance valves
including their spares are phased to be procured in FY 20. In view of above
constraint, it is humbly prayed Commission to approve the Spare TDBFP
Recirculation Valve in terms of the 2014 Tariff Regulations.

(d) Boiler Tubes

It is humbly submitted that some specific portion of pressure parts like bends and
joints are exposed to high ash content coal, which had damaged such pressure
parts. Such damaged parts require replacement for safety and reliability of the Plant.
Accordingly, some spare boilers tubes/pressure parts were procured in 2018 to
refurbish the damaged pressure parts of boiler like economiser, super-heater, re-
heater etc. It is, therefore, prayed to approve the Spare Boiler Tubes/pressure parts
under Regulation 29(2) of the 2014 Tariff Regulations.”

143. In terms of Regulation 29(2) of the 2014 Tariff Regulations, the actual

expenses incurred by the Petitioner towards capital spares consumed are admissible

as additional O&M expenses. The Petitioner has certified that the capital spares

Order in Petition No. 408/GT/2020 Page 85 of 178

claimed have not been funded through Compensatory Allowance or Special

Allowance in terms of the 2014 Tariff Regulations or has been claimed as part of

additional capital expenditure or by consumption of stores and spares for R&M.

Moreover, the cost of the capital spares claimed by the Petitioner has been excluded

from the ‘gross capital cost’ under the head ‘exclusion’ in the additional capitalization

of spares. It is pertinent to mention that the term ‘capital spares’ has not been

defined in the 2014 Tariff Regulations. The term capital spares, in our view, is a

piece of equipment, or a spare part, of significant cost that is maintained in inventory

for use in the event that a similar piece of critical equipment fails or must be rebuilt.

Keeping in view the principle of materiality and to ensure standardised practices in

respect of earmarking and treatment of capital spares, the value of capital spares

exceeding Rs.1 (one) lakh, on prudence check of the details furnished by the

Petitioner in Form-17 of the petition, has been considered for the purpose of tariff.

Further, we are of the view that spares do have a salvage value. Accordingly, in line

with the practice of considering the salvage value, presumed to be recovered by the

Petitioner on sale of other capital assets, on becoming unserviceable, the salvage

value of 10% has been deducted from the cost of capital spares considered above,

for the 2014-19 tariff period. Therefore, on prudence check of the information

furnished by the Petitioner in Form-17 and on applying the said ceiling limit along

with deduction of the salvage value @10%, the net capital spares allowed in terms of

Regulation 29(2) of 2014 Tariff Regulations is as follows:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Spare Circuit Breaker for MV & LV 0.00 0.00 18.96 0.00 7.18
Switchgear (BTG & main)
Spare Motors for (BTG, RWP & AHP) 0.00 0.00 39.38 16.36 0.00
TDBFP Recirculation valve 0.00 0.00 0.00 27.61 2.37
Boiler Tubes* 0.00 0.00 0.00 0.00 0.00
Total before salvage value 0.00 0.00 58.34 43.97 9.55
Less: Salvage value @10% 0.00 0.00 5.83 4.40 0.96
Total capital spares allowed 0.00 0.00 52.51 39.57 8.59

Order in Petition No. 408/GT/2020 Page 86 of 178

 *Expenditure against Boiler tubes has not been considered as the details of boiler tubes including numbers
consumed has not been provided. Further, such expenditure is deemed to be covered under normative O&M
expenses

144. Accordingly, the total O&M expenses allowed in terms of the 2014 Tariff

Regulations are as under:

(Rs in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Normative O&M Expenses 16800.00 17860.50 18984.00 20181.00 21451.50
as per Regulation 29(1)(a)
of the 2014 Tariff
Regulations
Water Charges as per 946.18 996.05 993.31 965.52 930.54
Regulation 29(2) of the
2014 Tariff Regulations
Capital Spares as per 0.00 0.00 52.51 39.57 8.59
Regulation 29(2) of the
2014 Tariff Regulations
Total O&M expenses 17746.18 18856.55 20029.82 21186.09 22390.63
allowed as per Regulation
29 of the 2014 Tariff
Regulations

Additional O&M expenses

A. In lieu of 2nd Township

145. The Petitioner has claimed the following additional O&M expenses in lieu of

2nd Township:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Rental Charges (a) 123.40 90.88 54.27 74.15 67.52
HRA deduction from employee (b) 78.19 67.34 62.58 65.80 75.11
Conveyance Charges (c) 55.15 52.55 65.92 66.63 58.79
Total - (a-b+c) 100.35 76.08 57.61 74.98 51.19

146. In support of the aforesaid claims, the Petitioner has submitted the following:

(a) MPL had planned to construct the second phase of the Township to
accommodate the balance employees after phase I. Due to unavailability of land in
the adjoining area of the existing township, the Petitioner made efforts to locate
suitable Land in nearby location to facilitate the above purpose. Through letter dated
25.11.2011, it had approached DVC for additional allocation of 30000 m2 of land in
the plot adjacent to the phase-I of the Township. However, further transfer of land
from DVC was restricted by the Circular No. 93/2011-CDN dated 6.4.2011 of the
Ministry of Urban Development, GOI, wherein Government undertakings like DVC
have been directed to seek prior approval of the Cabinet for any transfer/alienation of
Land belonging to the Government. The Petitioner approached the district
administration to acquire land of approximately 30 acres. However, the land identified
by the district administration for the construction of Phase II of the township is owned
by the tribal community and GOJ. Accordingly, it again persuaded the district

Order in Petition No. 408/GT/2020 Page 87 of 178

 administration for obtaining the necessary clearance for acquisition of land from the
tribal community and GOJ. For past 8 years the Petitioner is struggling to find
suitable land for phase-II of township in and around generating station. Therefore, in
view of the non-availability of contiguous litigation free land and recommendation of
the Petitioner’s Management, the Board of Directors of it, in its 92nd Meeting of held
on, 16.3.2019 has approved dropping of the additional capital expenditure in respect
of ‘Colony and Township” of ₹60.00 crore;

(b) Presently, the employees of the Petitioner are accommodated in Dhanbad and
Asansol (approximately 40-50 km from the generating station) in rented
accommodation and bus service is provided to employee for conveyance for both
normal and shift duties. This has resulted into additional O&M cost which is not part
of Normative O&M Expenses. Total cost incurred by the Petitioner in absence of
phase II of “Township & Colony” is presented in table below;
(c) Had the Petitioner been able to come-up with the Phase-II of the Township and
Colony at the projected capital expenditure of ₹60 crores by 31.3.2014, the total
Annual Fixed Charges (AFC) recovery towards Phase-II of the Township in the
remaining years of the useful life of the Station would have been ₹223 crore whereas
if it pursues the current arrangement for employees as stated above it would require
additional O&M expenses towards rent and conveyance of about ₹23.15 crore over
the same period resulting into a net savings of ₹199.38 crore for the beneficiaries
which shall ultimately rests with them. Therefore, the Petitioner is seeking these
Rental and Conveyance Expenses over and above Normative O&M Expenses.
Going with existing arrangement and seeking additional O&M expenses in lieu of
Phase-II of the township and utilizing savings for other cost overrun is in no way
causing harm to the beneficiaries and shall be a fair approach to compensate the
costs incurred/to be incurred by the Petitioner. For arriving at savings, AFC has been
computed as per 2014 Tariff Regulations and assuming that the additional capital
expenditure was capitalized on 31.3.2014. Rent, HRA deduction and conveyance
charges have been considered at actual for 2014-15 to 2018-19 and thereafter
projected based on average of the previous five years with an annual escalation of
5% thereon until useful life of the generating station. Detailed workings of AFC and
additional O&M expenses and net savings on account of this annexed for kind
perusal of the Commission;

(d) In view of foregoing, Commission is, therefore, most humbly requested to allow
the expenses incurred by the Petitioner towards the Rental expenses adjusted with
HRA and conveyance charges at actuals for the period 2014-15 to 2018-19
separately as additional O&M Expenses over and above the Normative O&M
expenses and thereafter for the ensuing years on the projected basis subject to
truing up of tariff, based on actuals.

147. The Respondent, KSEBL has submitted that since the normative O&M

expenses is allowed for the project, the claim for additional O&M expenses in lieu of

2nd Township is not in line with the 2014 Tariff Regulations and may be rejected. In

response, the Petitioner has submitted that it had to drop the plan for 2nd township

due to ‘force majeure’ conditions and was constrained to accommodate its

employees in nearby cities and arrange transport facilities to office. It has also

Order in Petition No. 408/GT/2020 Page 88 of 178

submitted that since such expenditure is not required to be incurred with staff being

accommodated in Township/ Colony as in other projects, this expenditure is not

covered under the normative O&M expenses. Accordingly, the Petitioner has

claimed such expenses over and above the normative O&M expenses allowed to the

generating station. The Petitioner has also contended that the 2014 Tariff

Regulations do not prohibit such claim of the Petitioner, arising due to force majeure

conditions/ uncontrollable factors in terms of Regulation 3(25) read with Regulation

8(3) and Regulation 54 of the 2014 Tariff Regulations.

148. It is noticed that the Petitioner has claimed additional O&M expenses due to

additional arrangement made for accommodation of its employees and their

conveyance, in lieu of the difficulty in constructing the township due to non-

availability of land. According to the Petitioner, this has resulted in savings in capital

expenditure and increase in the O&M expenses, as there will be no additional

burden on the consumer, as the claim of additional O&M expenses is against the

savings of tariff due to non-capitalization of additional township. The Petitioner has

stated that due to non-availability of the land, the idea of Township colony was

dropped and thereby the projected capital expenditure of Rs.60 crore was not

incurred. As per submissions of the Petitioner, the total annual fixed charges

recovery towards the 2nd Township, in the remaining years of the useful life of the

generating station, would have been Rs.223 crore, whereas, in terms of the existing

arrangement for the employees, it would require additional O&M expenses towards

Rent and Conveyance of about Rs.23.15 crore over the same period, resulting into a

net savings of Rs.199.38 crore for the beneficiaries.

149. The admissibility of the claim of the Petitioner is examined in the light of the

provisions of the 2014 Tariff Regulations. The O&M expense norms for the 2014

Order in Petition No. 408/GT/2020 Page 89 of 178

tariff period has been duly notified taking into consideration the actual O&M

expenses incurred by the generating stations for the period 2008-2013 and after

extensive stakeholder consultations. As the said O&M expense norms adequately

captures all components as stated by the Petitioner, the prayer of the Petitioner for

additional O&M expenses, if allowed, under this head, would, in our view, result in

re-opening of the O&M expense norms at this stage. For these reasons, the prayer

of the Petitioner for additional O&M expenses in lieu of 2nd Township is not allowed.

B. Ash Disposal expenses

150. The Commission in its order dated 25.4.2019 in Review Petition No.

16/RP/2018 (in Petition No. 152/GT/2015) had allowed the projected ‘Ash disposal’

expenses for the 2014-19 tariff period as under:

(Rs. in crore)
2014-15 2015-16 2016-17 2017-18 2018-19 Total
60.98 62.70 66.50 70.72 0.00 260.90

151. The Petitioner, in the present petition, has claimed audited actual ‘Ash

disposal’ expenses for the 2014-19 tariff period as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19 Total
6098.44 3791.36 3647.73 3320.87 3340.46 20198.86

152. The Respondent, KSEBL has submitted that the claim towards ash disposal

expenses over and above the normative O&M expenses is not in line with the 2014

Tariff Regulations and, therefore, the claim may be disallowed. The Petitioner in its

rejoinder has submitted that issue is no more res integra as the Ash disposal

expenses over and above the normative O&M expenses had already been approved

by the Commission vide its order dated 26.12.2017 in Petition No. 152/GT/2015 and

by order dated 25.4.2019 in Petition No. 16/RP/2018 read with corrigendum order

dated 25.5.2019 subject to truing-up. The Petitioner has also stated that Ash

Order in Petition No. 408/GT/2020 Page 90 of 178

disposal expenses are statutory in nature and needs to be incurred on a regular

basis due to the limited capacity of ash pond and in compliance with the MOEF&CC

Notification which mandate 100% ash utilization.

153. The submissions have been considered. The Commission in its order dated

25.4.2019 in Review Petition No.16/RP/2018 (in Petition No.152/GT/2015) had

allowed the ‘Ash disposal’ expenses, based on actuals of the year 2014-15 and

projected expenses for the period 2015-19, subject to revision, based on the actual

Ash disposal expenses incurred by the Petitioner, at the time of truing up of tariff.

The Petitioner has claimed actual expenses towards ash disposal, after adjustment

of the revenue earned and has submitted the break-up details, duly certified by

Auditor. Accordingly, the audited net ash disposal expenses, after adjustment of the

revenue earned, as claimed by the Petitioner is allowed as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19 Total
6098.44 3791.36 3647.73 3320.87 3340.46 20198.86

154. Considering the fact that reimbursement of the ash disposal expenses is

being allowed based on special circumstances (limited ash pond storage) for the

generating station, these expenses are not made part of the total O&M expenses

allowed and the consequent annual fixed charges determined in this order.

Interest on Working Capital

155. Clauses (1) and (2) of Regulation 28 of the 2014 Tariff Regulations provide as

under:

“28. Interest on Working Capital:

(1) The working capital shall cover:

(a) Coal-based/lignite-fired thermal generating stations:
(i) Cost of coal or lignite and limestone towards stock if applicable for 15 days for
pithead generating stations and 30 days for non-pit-head generating stations for

Order in Petition No. 408/GT/2020 Page 91 of 178

 generation corresponding to the normative annual plant availability factor or the
maximum coal/lignite stock storage capacity whichever is lower;
(ii) Cost of coal or lignite and limestone for 30 days for generation corresponding to
the normative annual plant availability factor;
(iii) Cost of secondary fuel oil for two months for generation corresponding to the
normative annual plant availability factor and in case of use of more than one
secondary fuel oil cost of fuel oil stock for the main secondary fuel oil;
(iv) Maintenance spares @ 20% of operation and maintenance expenses specified in
regulation 29;
(v) Receivables equivalent to two months of capacity charges and energy charges for
sale of electricity calculated on the normative annual plant availability factor; and
(vi) Operation and maintenance expenses for one month.

(2) The cost of fuel in cases covered under sub-clauses (a) and (b) of clause (1) of
this regulation shall be based on the landed cost incurred (taking into account
normative transit and handling losses) by the generating company and gross calorific
value of the fuel as per actual for the three months preceding the first month for
which tariff is to be determined and no fuel price escalation shall be provided during
the tariff period.

Fuel cost and Energy charges in Working Capital

156. The Commission in its order dated 26.12.2017 in Petition No.152/GT/2015

had allowed interest on working capital based on ‘as billed GCV’ on provisional

basis, as follows:

“165. ………We however direct the Petitioner to place on record the GCV of coal for
the preceding three months on “as received” basis in terms of the directions
contained in order dated 25.1.2016, at the time of truing-up of tariff of the generating
station for 2014-19 in terms of Regulation 8 of the 2014 Tariff Regulations. The “as
received GCV” furnished by the Petitioner for the few days of the month of October,
2016 for which sample is taken from the track hopper cannot be considered “as
received‟ GCV of coal since the computation for fuel components in the working
capital is undertaken based on the preceding three months i.e. for the month of
January, 2014, February, 2014, and March, 2014. Also, the sample taken from track
hopper is not in compliance with the Commission order dated 25.1.2016 in Petition
No. 283/GT/2014, which specify that the measurement of GCV of coal on “as
received” basis shall be taken from the loaded wagons at the unloading point either
manually or through the Hydraulic Augur.”

157. The Commission vide order dated 26.12.2017 in Petition No.152/GT/2015

allowed the fuel cost for computation of interest on working capital (IWC) based on

price and GCV on ‘as billed’ basis with adjustment formula as Petitioner did not

furnish the requisite “as received GCV”. The Petitioner has not furnished the details

of ‘as received’ GCV in the true-up petition also and has also not made any prayer

Order in Petition No. 408/GT/2020 Page 92 of 178

for revision of interest on working capital (IWC) with respect to GCV on ‘as received’

basis. In this background, we have considered the ‘as billed’ GCV to be ‘as received’

GCV, and the components of working capital i.e. the cost of coal for stock (30 days),

cost of coal for generation (30 days) and Energy charges (for two months) as

allowed in Commission’s order dated 26.12.2017 in Petition No.152/GT/2015, has

been considered for the purpose of tariff, in this order. Accordingly, the fuel

components in working capital have been allowed as per order dated 26.12.2017 in

Petition No.152/GT/2015 which is as follows:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Cost of Coal towards stock - 30 10458.70 10487.35 10458.70 10710.71 10710.71
days
Cost of Coal for towards 10315.43 10315.43 10315.43 10563.99 10563.99
generation - 30 days
Cost of Secondary fuel oil 300.37 301.19 300.37 307.60 307.60
towards generation - 2 months

Working capital for Maintenance Spares

158. The Petitioner, in Form-13B of the petition, has claimed maintenance spares

towards working capital as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
3569.31 3786.53 4018.58 4255.10 4488.65

159. Regulation 28(1)(a)(iv) of the 2014 Tariff Regulations provides for

maintenance spares @20% of the O&M expenses as specified in Regulation 29 of

the 2014 Tariff Regulations. Therefore, in terms of Regulation 29(2) of the 2014

Tariff Regulations, the maintenance spares @20% of the O&M expenses, including

water charges and capital spares are allowed are as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
3549.24 3771.31 4005.96 4237.22 4478.13

Order in Petition No. 408/GT/2020 Page 93 of 178

Working capital for O & M Expenses

160. O&M expenses for 1 month as claimed by the Petitioner in Form-13B for the

purpose of working capital are as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
1487.21 1577.72 1674.41 1772.96 1870.27

161. Regulation 28(a)(vi) of the 2014 Tariff Regulations provides for O&M

expenses for one month towards Working Capital for coal-based generating stations.

Accordingly, the O&M expenses (for 1 month) are allowed as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
1478.85 1571.38 1669.15 1765.51 1865.89

162. The difference in the O&M expenses for 1 month and the Maintenance spares

allowed as above, as against those claimed by the Petitioner, is due to the fact that

while the Petitioner had considered the O&M expenses in lieu of 2nd Township also

for calculation under these heads, the same has not been considered (since dis-

allowed in this order) in the calculations, while allowing the claims under these

heads.

Working capital for Receivables

163. Receivables equivalent to two months of capacity charges and two months of

energy charges towards Working Capital (as allowed in Commission’s order dated

26.12.2017 in Petition No.152/GT/2015) are allowed as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Fixed charges –
17253.62 17484.40 17233.33 16747.94 16621.10
for two months
Energy Charges – 21074.50 21103.97 21074.50 21582.30 21582.30
for two months

Rate of interest on working capital

164. Regulation 28(3) of the 2014 Tariff Regulations provides as under:

“Interest on working Capital:

Order in Petition No. 408/GT/2020 Page 94 of 178

 (3) Rate of interest on working capital shall be on normative basis and shall be
considered as the bank rate as on 1.4.2014 or as on 1st April of the year during the
tariff period 2014-15 to 2018-19 in which the generating station or a unit thereof or the
transmission system including communication system or element thereof, as the case
may be, is declared under commercial operation, whichever is later.”

165. In terms of clause (3) of Regulation 28 of the 2014 Tariff Regulations, the rate

of interest on working capital has been considered as 13.50% (Bank rate 10.00 +

350 bps). Accordingly, Interest on working capital has been computed as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Working Capital - Cost of coal 10458.70 10487.35 10458.70 10710.71 10710.71
for stock - 1 month
Working Capital - Cost of coal 10315.43 10315.43 10315.43 10563.99 10563.99
for generation - 1 month
Working Capital for O&M 1478.85 1571.38 1669.15 1765.51 1865.89
expenses - 1 month of O&M
Expenses
Working Capital - Cost of 300.37 301.19 300.37 307.60 307.60
secondary fuel oil - 2 months
Working Capital for Maintenance 3549.24 3771.31 4005.96 4237.22 4478.13
spares
Working Capital for Receivables 17253.62 17484.40 17233.33 16747.94 16621.10
(Fixed charges - 2 months)
Working Capital for Receivables 21074.50 21103.97 21074.50 21582.30 21582.30
(Variable charges - 2 months)
Total Working Capital 64430.71 65035.02 65057.44 65915.27 66129.71
Rate of Interest 13.50% 13.50% 13.50% 13.50% 13.50%
Interest on Working Capital 8698.15 8779.73 8782.75 8898.56 8927.51

Annual Fixed Charges

166. Accordingly, the annual fixed charges approved for the generating station for

the 2014-19 tariff period is summarized as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Return on Equity 26333.62 27727.29 28076.30 28102.15 28295.00
Interest on Loan 27957.86 25842.46 22561.92 18331.74 15953.23
Depreciation 22785.93 23700.34 23949.17 23969.12 24160.20
O&M Expenses 17746.18 18856.55 20029.82 21186.09 22390.63
Interest on Working 8698.15 8779.73 8782.75 8898.56 8927.51
Capital
Total 103521.74 104906.37 103399.96 100487.66 99726.57

167. As stated in paragraph 153 above, the Ash disposal expenses allowed is as

below:

Order in Petition No. 408/GT/2020 Page 95 of 178

 (Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19 Total
6098.44 3791.36 3647.73 3320.87 3340.46 20198.86
A

168. The annual fixed charges allowed in order dated 1.10.2019 in Petition

No.152/GT/2015 and those allowed by this order are as under:

(Rs. in lakh)
Total annual fixed 99154.50 106314.26 107868.34 106552.83 111287.93
charges allowed in
order dated 1.10.2019
Total annual fixed 103521.74 104906.37 103399.96 100487.66 99726.57
charges allowed in
this order

169. The difference between the annual fixed charges already recovered by the

Petitioner in terms of the order dated 26.12.2017 read with order dated 1.10.2019 in

Petition No.152/GT/2015 and the annual fixed charges determined by this order shall

be adjusted in terms of Regulation 8 of the 2014 Tariff Regulations.

DETERMINATION OF TARIFF FOR THE 2019-24 TARIFF PERIOD

170. The Petitioner has also sought determination of tariff of the generating station

for the 2019-24 tariff period in terms of the Central Electricity Regulatory

Commission (Terms and Conditions of Tariff) Regulations, 2019 (in short ‘the 2019

Tariff Regulations’). The capital cost and the annual fixed charges claimed by the

Petitioner for the 2019-24 tariff period are as under:

Capital cost claimed

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Opening Capital Cost 487912.60 495633.42 567869.17 570388.32 571685.4
9
Add: Addition during the year 8043.42 74677.26 4259.96 2230.40 1409.61
Less: De-capitalisation during 1138.34 2927.46 2110.64 1119.45 727.30
the year
Add: Normative IDC on excess 735.90 446.12 337.89 185.90 158.15
equity
Add: Normative IDC on actual 79.84 39.84 31.94 0.32 0.10
loan
Net Addition during the year 7720.82 72235.75 2519.16 1297.17 840.56
Closing Capital Cost 495633.42 567869.17 570388.32 571685.49 572526.06

Order in Petition No. 408/GT/2020 Page 96 of 178

Annual Fixed Charges claimed
(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Depreciation 24749.94 27550.14 28974.28 28636.91 28520.47
Interest on Loan 19930.00 20362.72 20382.68 17312.75 14126.82
Return on Equity 27697.63 29925.95 32013.23 32113.07 32170.55
Interest on Working 9004.43 9141.36 9303.66 9273.90 9285.71
Capital
O & M Expenses 27212.89 28222.13 30425.80 30830.27 32146.01
Ash Disposal Expenses 3425.59 3416.23 3416.23 3416.23 3425.59
Additional Tax 38.28 38.28 0.00 0.00 0.00
Total 112058.77 118656.81 124515.87 121583.13 119675.14

Capital Cost
171. Regulation 19 of the 2019 Tariff Regulations provides as under:

“19. Capital Cost: (1) The Capital cost of the generating station or the transmission
system, as the case may be, as determined by the Commission after prudence
check in accordance with these regulations shall form the basis for determination of
tariff for existing and new projects.
xxxx
(3) The Capital cost of an existing project shall include the following:
(a) Capital cost admitted by the Commission prior to 1.4.2019 duly trued up by
excluding liability, if any, as on 1.4.2019;
(b) Additional capitalization and de-capitalization for the respective year of tariff as
determined in accordance with these regulations;
(c) Capital expenditure on account of renovation and modernisation as admitted by
this Commission in accordance with these regulations;
(d) Capital expenditure on account of ash disposal and utilization including handling
and transportation facility;
(e) Capital expenditure incurred towards railway infrastructure and its augmentation
for transportation of coal up to the receiving end of generating station but does not
include the transportation cost and any other appurtenant cost paid to the railway;
and
(f) Capital cost incurred or projected to be incurred by a thermal generating station,
on account of implementation of the norms under Perform, Achieve and Trade
(PAT) scheme of Government of India shall be considered by the Commission
subject to sharing of benefits accrued under the PAT scheme with the beneficiaries.”

172. The Petitioner has claimed the opening capital cost of Rs.487912.60 lakh as

on 1.4.2019. However, in accordance with Regulation 19(3) of the 2019 Tariff

Regulations, the closing capital cost of Rs. 478969.24 lakh as on 31.3.2019, as

approved in this order, for the 2014-19 tariff period, has been considered as the

opening capital cost as on 1.4.2019, for determination of tariff for the 2019-24 tariff

period.

Order in Petition No. 408/GT/2020 Page 97 of 178

Additional Capital Expenditure
173. Regulations 25 and 26 of the 2019 Tariff Regulations provide as under:

“25. Additional Capitalisation within the original scope and after the cut-off date:
(1) The additional capital expenditure incurred or projected to be incurred in
respect of an existing project or a new project on the following counts within the
original scope of work and after the cut-off date may be admitted by the
Commission, subject to prudence check:
(a) Liabilities to meet award of arbitration or for compliance of the directions or
order of any statutory authority, or order or decree of any court of law;
(b) Change in law or compliance of any existing law;
(c) Deferred works relating to ash pond or ash handling system in the original
scope of work;
(d) Liability for works executed prior to the cut-off date;
(e) Force Majeure events;
(f) Liability for works admitted by the Commission after the cut-off date to the
extent of discharge of such liabilities by actual payments; and
(g) Raising of ash dyke as a part of ash disposal system.
(2) In case of replacement of assets deployed under the original scope of the
existing project after cut-off date, the additional capitalization may be admitted by
the Commission, after making necessary adjustments in the gross fixed assets
and the cumulative depreciation, subject to prudence check on the following
grounds:
(a) The useful life of the assets is not commensurate with the useful life of the
project and such assets have been fully depreciated in accordance with the
provisions of these regulations;
(b) The replacement of the asset or equipment is necessary on account of change
in law or Force Majeure conditions;
(c) The replacement of such asset or equipment is necessary on account of
obsolescence of technology; and
(d) The replacement of such asset or equipment has otherwise been allowed by
the Commission.

26. Additional Capitalisation beyond the original scope

(1) The capital expenditure, in respect of existing generating station or the
transmission system including communication system, incurred or projected to be
incurred on the following counts beyond the original scope, may be admitted by
the Commission, subject to prudence check:
(a) Liabilities to meet award of arbitration or for compliance of order or directions
of any statutory authority, or order or decree of any court of law;
(b) Change in law or compliance of any existing law;
(c) Force Majeure events;

Order in Petition No. 408/GT/2020 Page 98 of 178

 (d) Need for higher security and safety of the plant as advised or directed by
appropriate Indian Government Instrumentality or statutory authorities responsible
for national or internal security;
(e) Deferred works relating to ash pond or ash handling system in additional to the
original scope of work, on case to case basis:
Provided also that if any expenditure has been claimed under Renovation and
Modernisation (R&M) or repairs and maintenance under O&M expenses, the same
shall not be claimed under this Regulation;
(f) Usage of water from sewage treatment plant in thermal generating station.

(2) In case of de-capitalisation of assets of a generating company or the

transmission licensee, as the case may be, the original cost of such asset as on
the date of de-capitalisation shall be deducted from the value of gross fixed asset
and corresponding loan as well as equity shall be deducted from outstanding loan
and the equity respectively in the year such de-capitalisation takes place with
corresponding adjustments in cumulative depreciation and cumulative repayment
of loan, duly taking into consideration the year in which it was capitalised.”

174. The Petitioner has claimed additional capital expenditure in respect of assets/

works which form part of the original scope of work of the project, but after the cut-off

date, in terms of the provisions of Regulation 25 of the 2019 Tariff Regulations. It has

also claimed additional capital expenditure in respect of assets/ works which are

beyond the original scope of work of the project in terms of the provisions of

Regulation 26 of the 2019 Tariff Regulations. Accordingly, the year-wise projected

additional capital expenditure claimed by the Petitioner for the 2019-24 Tariff Period

is summarized and examined under:

(Rs. in lakh)
Sl. Head of work/Equipment Regulations 2019-20 2020-21 2021-22 2022-23 2023-24
No.
A Projected Additional Capitalisation within the original scope of work, but after the cut-off date
1 Cost of Land &Site 25(1)(e) 3881.64 - - - -
2 General Civil Works-Boundary 25(1)(e) 160.00 - - - -
Wall
3 Railway Package 25(1)(e) - 68506.24 - - -
(inclusive of IDC)
4 IT equipment 25(2)(b) 82.93 - - - -
5 2 Numbers Flat Top Freezers 25(2)(b) - - - - -
@ Aahar I
6 C.T.Fan Gearbox 25(2)(b) - 200.00 - - -
7 Centrifugal compressor and 25(2)(b) - 350.00 400.00 - -
motor for BTG
8 Centrifugal Compressors for 25(2)(b) - 300.00 300.00 300.00 300.00
Ash Plant
9 Coal Mill Internals 25(2)(b) - 100.00 200.00 200.00 -

Order in Petition No. 408/GT/2020 Page 99 of 178

Sl. Head of work/Equipment Regulations 2019-20 2020-21 2021-22 2022-23 2023-24
No.
10 Coal Mill Journal Assembly 25(2)(b) - 200.00 300.00 300.00 -
11 Cooling Tower Internals 25(2)(b) - 100.00 100.00 100.00 100.00
12 Economiser Coil (both Upper & 25(2)(b) - 1200.00 - - -
Lower Bank)
13 Fabrication of expansion 25(2)(b) 46.90 40.07 - - -
bellows
14 Godrej Storewell 12 numbers 25(2)(b) - 3.00 - - -
for GH
15 LG 230 litres Fridge 5 numbers 25(2)(b) - 1.50 - - -
16 LTSH Coil (both Upper & 25(2)(b) - - 800.00 - -
Lower Bank)
17 Office Chairs 25(2)(b) - 25.00 - - -
18 Refurbishment of DM Plant 25(2)(b) 118.02 - - - -
Piping and Tanks
19 Refurbishment of Economiser 25(2)(b) 50.00 - - - -
Coil Unit 2
20 Refurbishment of Economiser 25(2)(b) 50.00 - - - -
Coil Unit1
21 Refurbishment of Pulverizer 25(2)(b) 100.00 - - - -
Internals
22 Refurbishment of U1 & U2 HP 25(2)(b) - - - - -
Bypass System
23 Re-heater Modification & MTM 25(2)(b) 191.47 - - - -
installation
24 Re-Heater Straight Tubes & 25(2)(b) - 350.00 400.00 450.00 450.00
Bends
25 Replacement of Slew 25(2)(b) - - 159.87 - -
Hydraulic Motor of Stacker-
cum-Re-claimer
26 Replacement of Township ACs 25(2)(b) - - 50.00 - -
27 Vacuum Pump 25(2)(b) - 200.00 200.00 - -
28 ID fan motor with VFD 25(2)(c) - 450.00 450.00 450.00 450.00
replacement
29 Laboratory Instruments 25(2)(c) - 21.94 57.08 52.90 22.11
30 MAX DCS Version up- 25(2)(c) 450.00 - - - -
gradation (XP) Unit 2
31 Replacement of Battery 25(2)(c) - 80.00 80.00 90.00 -
32 Up-gradation of CHP Main 25(2)(c) - 60.00 - - -
PLC
33 Up-gradation of DMP PLC 25(2)(c) - 50.00 - - -
34 Up-gradation of Raw Water 25(2)(c) - 50.00 - - -
PLC
B Projected Additional Capitalization beyond the original scope of work
35 Soak Pit for Station 26(1)(a ) 40.00 - - - -
transformer in switchyard.
36 Up-gradation of ABT for RRAS 26(1)(a ) - 75.00 - - -
& SCED
37 Implementation of AGC 26(1)(a ) 80.00 - - - -
38 Drinking Water Facility 26(1)(b) 19.77 - - - -
39 Drivers' rest room 26(1)(b) - 5.00 - - -
40 Facility creation for workmen: 26(1)(b) - 37.50 37.50 37.50 37.50
Rest Room, Toilet and drinking

Order in Petition No. 408/GT/2020 Page 100 of 178

Sl. Head of work/Equipment Regulations 2019-20 2020-21 2021-22 2022-23 2023-24
No.
water point
41 Workers pathway 26(1)(b) - 150.00 - - -
42 Augmentation of ash handling 26(1)(c) 1416.80 500.00 - - -
43 Augmentation of store 26(1)(c) 329.26 - - - -
44 BCN 7 (Yard Conveyor) 26(1)(c) - - - - -
modification
45 Chute Interconnection in 4A to 26(1)(c) - - 50.00 - -
6B & 4B to 6A
46 Coal Pit Run-off mechanised 26(1)(c) 399.53 - - - -
Drainage systems
47 Common C.W.Pump for Unit 26(1)(c) - - - - -
No.1& Unit No.2
48 Covered Parking Block at 26(1)(c) - 2.50 - - -
Township
49 Economiser Coil Repairing Bay 26(1)(c) - 600.00 - - -
with shed
50 Electric Vehicle (cart) for 26(1)(c) - - - - -
visitors movement
51 Industrial kitchen setup at MA- 26(1)(c) - 6.50 - - -
2
52 Installation of suspended 26(1)(c) 52.41 - - - -
magnet
53 Modernization of Gym, Rooftop 26(1)(c) 5.00 - - - -
cafeteria and Community hall
55 Workshop for EMD 26(1)(c) - 50.00 - - -
56 Automation of Boom barrier 26(1)(d) - 20.00 - - -
57 Boundary wall under pass area 26(1)(d) - 100.00 - - -
58 CCTV installation all around 26(1)(d) - 200.00 200.00 150.00 -
plant. (76 CCTV planned)
59 Construction of high-rise safety 26(1)(d) 300.00 - - - -
platform and walkways)
60 E- Security system 26(1)(d) 148.99 100.00 - - -
61 Economiser platform for both 26(1)(d) - 350.00 - - -
boilers
62 Gate House Near JNT 26(1)(d) 120.70 - - - -
63 Mini Fire tender 26(1)(d) - 25.00 - - -
64 Road along Boundary wall 26(1)(d) - - 150.00 100.00 50.00
(Periphery Road 18 kms)
C Total additional 8043.42 74677.26 4259.96 2230.40 1409.61
capitalexpenditure claimed
D Less: De-capitalization during 1138.34 2927.46 2110.64 1119.45 727.30
the year / period
E Net additional 6905.08 71749.80 2149.32 1110.95 682.31
capitalexpenditure claimed

Projected additional capital expenditure within the original scope of work of

the project under Regulation 25(1)(e) of the 2019 Tariff Regulations

175. Regulation 25(1)(e) of the 2019 Tariff Regulations provide as under:

Order in Petition No. 408/GT/2020 Page 101 of 178

 “25. Additional Capitalization within the original scope and after the cut-off
date:
(1) The additional capital expenditure incurred or projected to be incurred in
respect of an existing project or a new project on the following counts within
the original scope of work and after the cut-off date may be admitted by the
Commission, subject to prudence check:
(a) xxx
xxxxx
(e) Force Majeure events;

176. The following additional capital expenditure has been claimed by the

Petitioner in respect of assets/ works which form part of the original scope of work of

the project, but after the cut-off date, under Regulation 25(1)(e) of the 2019 Tariff

Regulations:

(Rs. in lakh)
Head of work / Equipment 2019-20 2020-21
a. Railway Infrastructure Package (inclusive of - 68506.24
IDC)
b. Cost of Land & Site 3881.64 -
c. General Civil Works-Boundary wall 160.00 -

177. The Petitioner has claimed projected additional capital expenditure of

Rs.68506.24 lakh for ‘Railway Infrastructure Package’ in 2020-21 under Regulation

25(1)(e) of the 2019 Tariff Regulations and has submitted the following:

a) Petitioner envisaged Railway Infrastructure Package to facilitate the

transportation of coal to the Project. The Railway Package was planned to be
executed in three phases, Phase I, Phase II and Phase III. Phase-I is
essential for existing Stage-I (of the generating station with the approved
Railway Project cost of Rs.574 crore (earlier Rs.405 crore) with a total
approved Project cost of Rs.5696 crore.

b) The land acquired for Phase I, Stage-1 by the Petitioner was 82.01 acres,
which comprises of 64.23 acres of Private land, 17.78 acres of Government
land (which includes 4.81 acres of Krishi land). Additionally, this Phase
included Railway land of 17 acres. The Private land and Government land is
spread over nine villages. The Petitioner earnestly started the work for
completion of the Railway Project immediately after Board approval and tying
up finance in 2008.

178. The Petitioner has submitted that the completion of Railway Infrastructure

Package was delayed due to reasons beyond the control of the Petitioner. The

Order in Petition No. 408/GT/2020 Page 102 of 178

Petitioner has also stated that it had already submitted detailed reasons in Petition

No.152/GT/2015 for the delay in the Railway Infrastructure Package. The Petitioner

has further submitted that the execution of few Project packages including the

Railway Infrastructure Package was delayed on account of reasons, primarily in

acquisition of requisite land parcels for this package, which are beyond the control of

the Petitioner and, therefore, the capitalization of these packages could not be

achieved within the cut-off date i.e. 31.3.2015. The summary of the reasons for the

delay in the completion of the Railway Package are as below:

i) Re-alignment of the Dedicated Freight Corridor and revision in Railway

norm of elevation from 1:400 to 1:1200;
ii) Rehabilitation and Resettlement (R&R) scheme for acquisition of land
required for Railways Infrastructure has taken longer time than anticipated due
to irregularities in payments made by the District Land Acquisition Officer
(DLAO);
iii) Denial of allotment of total quantum of land by Eastern Railways;

iv) Multiple technical issues raised and multiple revisions of approved

DPR, ESP, ESSP, S&T caused by Eastern Railways;

v) Unlawful encroachments in Railway lands and inaction by the

Government of Jharkhand (GoJ) and Railways;
vi) Ownership claims by local residents on GM land (Gair Majarua land)
allocated to Petitioner and inaction by GoJ;

vii) Disputes raised with respect to ownership of Private land by

landowners and inaction by GoJ to resolve the same;
viii) Widespread disputes &scams relating to payment of compensation to
wrong persons by the Government officials;

ix) Litigation with respect to acquisition of land and compensation thereof;

and

x) Delay in the appointment of DLAO to oversee disputes pertaining to

acquisition of land by Petitioner.

179. The Petitioner in Annexure-P/6 of the petition has furnished the details of time

and cost overrun of the Railway Infrastructure Package along with justification. The

Petitioner has submitted that it made all efforts to expedite the possession of land

Order in Petition No. 408/GT/2020 Page 103 of 178

parcels and completed the construction in those patches of land parcels in phases

as and when the possession of these parcels were obtained, which at times needed

changes in design and scope due to actual site measurements being different from

estimates in design, when access was available for those parcels. The Petitioner has

submitted that with the present status and speed of resolution of disputes, it is

expected that the entire land related issues pertaining to Railway Infrastructure

Package would be resolved and possession of all land parcels would be obtained by

the end of June 2020 and accordingly the Railway Infrastructure Package would be

completed by 31.3.2021. It has stated that land acquisition has been categorized as

an ‘uncontrollable factor’ under the 2019 Tariff Regulations if the delay is for reasons

not attributable to the Petitioner. The Petitioner has added that the significance of

completing the Railway Infrastructure Package also arises from the fact that the

present arrangement of transporting coal through trucks has been seen as an

environmental concern and from fuel security point of view for ensuring supply to the

beneficiaries on completion of the Railway Infrastructure Package gains utmost

importance. The Petitioner has submitted that the delay in commissioning of Railway

Infrastructure Package is mainly due to land related issues which were totally out of

control of the Petitioner and the same is a ‘force majeure’ condition, which is to be

considered and allowed in terms of Regulation 3(25) read with Regulation 25 of the

2019 Tariff Regulations.

180. As regards cost overrun of the Railway Infrastructure Package, the Petitioner

has submitted that the same was beyond the control of the Petitioner and the

increase in the Railway Infrastructure Package cost forced the Petitioner’s Board to

re-allocate the project cost. In addition, the Petitioner has stated that the Railway

Infrastructure Package contract which was initially awarded to M/s L&T had to be

split into three parts, on account of the unforeseen delays and was reallocated

Order in Petition No. 408/GT/2020 Page 104 of 178

among the initial contractor M/s L&T, and the new contractors M/s Amex and M/s

Kanwar. The Petitioner’s Board in its meeting dated 16.3.2019 had approved the

cost and internal allocations under the ‘Railway Infrastructure cost’ for Rs.574.66

crore excluding IDC. It has further stated that during the execution of the packages

identified under Railway infrastructure, the cost allocation was changed and

approved by the Board for revised allocation, keeping the overall cost of Railway

Infrastructure package within the approved budget of Rs.574.66 crore in the Board

meeting dated 16.10.2019. The Petitioner has submitted that the total IDC is

Rs.152.75 crore on Railway Infrastructure Package. We note that the total Railway

Infrastructure Package cost approved by the Board works out to Rs.712.14 crore

(Rs.559.38 crore + Rs.152.75 crore) out of which the Petitioner has capitalized and

claimed Rs.28.13 crore (Rs.24.13 crore + Rs.4.49 crore of IDC) during 2015-16

which has not been allowed (as discussed in earlier part of this order) as the Railway

Package could not be put to use during 2015-16.

181. The Petitioner has claimed projected additional capital expenditure of

Rs.3881.64 lakh in 2019-20 towards the cost of ‘Land & Site’ and additional

capitalization of Rs.160.00 lakh in 2019-20 towards ‘General Civil Works’ under

Regulation 25(1)(e) of the 2019 Tariff Regulations and has submitted the following:

(a) Land & Site

a) The Petitioner has envisaged the revised demand for 115 acres GM land as per
present circle rate at Rs.35.28 crore. Also, the payment for Krishi farmland for 4.81
acres (80% of which has already been paid) for Railways corridor consisting of land in
Kumthol and Poddardih village and the remaining 20% of payment demand (for
Rs.0.60 crore) is envisaged in 2019-20. Similarly, 80% payment for 6.96 acres of GM
land for Stage 1 and 6.01 acres of land for Stage-2 meant for the Railway corridor has
been paid and the balance demand for 20% is estimated at Rs. 2.54 crore in 2019-20.

b) Even after continuous follow-up, the balance demand is yet to be received from the
Govt. of Jharkhand. The same is beyond the control of the Petitioner and ought to be
considered as an ‘uncontrollable factor’.

Order in Petition No. 408/GT/2020 Page 105 of 178

 c) The detailed submissions justifying the ‘force majeure’ delay on account of land
issues had already been furnished in the truing-up of tariff in this petition and the same
are not repeated here for the sake of brevity. The detailed reasons for the delay have
been finished in Annexure P/5 of the petition.

(b) General Civil Works

The delay in the execution of works in General Civil Works (GCW) Package is on
account of various reasons beyond the control of the Petitioner as under:
(a) The balance works to be carried out under the GCW Package is mainly on account
of the un-finished portion of the boundary wall around the Ash Pond and construction
of boundary wall in 226 acres land.

(b) Although the remaining work is related to Ash Pond and construction of wall, the
same is included under the ‘General Civil Works’ owing to the nature of the balance
scope of work. The completion of the boundary wall around the Ash Pond has been
delayed on account of land related issues, the resolution of which has taken much
longer time than envisaged earlier. Therefore, the balance work of the boundary wall is
expected to be completed by 2019-20.

(c) The detailed submissions justifying the delay in execution of General Civil Works
has been furnished in the truing-up of tariff petition in Annexure P/12 of the petition and
the same are not repeated herein for sake of brevity.

182. The Respondent, KSEBL has mainly submitted that the Petitioner is not

eligible to seek the additional capitalization of the expenditure towards cost of land &

site and for Railway Infrastructure Package, after the cut-off date. It has also

submitted that there has been lack of co-ordination on part of the Petitioner with the

local administration for resolution of disputes, which has led to the inordinate delay in

the execution of the work. Accordingly, the Respondent has prayed that the impact

of cost & time overrun for the aforesaid work may not be passed on to the

beneficiaries.

183. The submissions have been considered. The Petitioner, in Petition

No.152/GT/2015, had furnished detailed reasons for the delay in the execution of the

Railway Infrastructure Package and submitted that the execution of few project

packages including Railway Infrastructure Project package was delayed primarily on

account of delay due to acquisition of requisite land parcels for this package, which

Order in Petition No. 408/GT/2020 Page 106 of 178

are beyond the control of the Petitioner and fall under ‘force majeure’ conditions. It

had, therefore, submitted that the capitalization of expenditure on the scheme could

not be achieved within the cut-off date and, accordingly, sought for extension of the

cut-off date of the project till 31.3.2019 in view of the constraints faced in the

execution of few project packages including Railways. Vide order dated 26.12.2017

in Petition No.152/GT/2015, the Petitioner was granted liberty to approach the

Commission for additional capitalization, based on the actual additional expenditure

incurred for these assets. The Petitioner, in this petition for truing up of tariff for the

2014-19 tariff period, claimed additional capitalization of these packages (Land &

Site and GCW) after the cut-off date (for 2015-19) on the ground that these

packages could not be completed within the cut-off date, due to ‘force majeure’

conditions, which were beyond the control of the Petitioner. It was also submitted by

the Petitioner that most of the project packages were completed in 2015-16, except

for the Railway System, GCW and Land & Site, which were expected to be

completed by 31.3.2021. It was, however, submitted that some assets in these

packages were put to use and part-capitalized during the 2014-19 tariff period and

the balance to be capitalised during the 2019-24 tariff period.

184. It is noticed that the Petitioner had claimed actual additional capitalization of

Rs.2861.56 lakh (including IDC of Rs.448.94 lakh) in 2015-16, towards Railway

Infrastructure Package, forming part of the original scope of work of the project and

had submitted that the said package was yet to be completed and operationalized by

the Petitioner, owing to severe land acquisition disputes as narrated therein including

submissions made in Petition No.152/GT/2015. However, on prudence check, it was

evident that the ‘Railway Infrastructure Package’ had not been completed and put to

use by the Petitioner. Only certain civil assets like roads, over-bridges and under-

Order in Petition No. 408/GT/2020 Page 107 of 178

passes were constructed and the expenditure incurred on these was sought to be

capitalized. Since the construction of these civil assets do not have any nexus with

the generation of power, the Commission, in this order, had not permitted the

additional capitalization of these assets, until the Railway Infrastructure Package was

completed. In other words, the capitalization of expenditure on ‘Railway

Infrastructure Package’ after the cut-off date was never considered as the same had

not been completed and put to use by the Petitioner. As regards the delay in Railway

Infrastructure Package, the Petitioner has made detailed submissions in Annexure

P/6 of the petition, similar to those made in Petition No.152/GT/2015. It is evident

from these submissions that the delay was mainly on account of ‘land acquisition’

issues, which also involved litigation before the Courts and payment of

compensation thereof. It is pertinent to mention that the Railway Infrastructure

Package could not be commissioned until all land parcels in the route were available

with the Petitioner free of any encumbrance. It is noticed that Regulation 22(2) of the

2019 Tariff Regulations provides for ‘land acquisition’ as an ‘uncontrollable factor’,

except where the delay is attributable to the generating company or the transmission

licensee, as the case may be. The relevant portion of the said regulation is extracted

hereunder:

“The ‘uncontrollable factors’ shall include but shall not be limited to the following:
a. Force Majeure events;
b. Change in law; and
c. Land acquisition except where the delay is attributable to the generating company
or the transmission licensee.”

185. From the submissions of the Petitioner with regard to time overrun for Railway

Infrastructure Package read with the submissions in Annexures P/5 & P/12 of this

petition, it is noticed that a series of events had affected the progress of resolution of

land acquisition issues. The Petitioner had made various correspondences/

communication with the local administration for expediting the land acquisition

Order in Petition No. 408/GT/2020 Page 108 of 178

process for Railway project and had also approached the Hon’ble High Court of

Jharkhand seeking directions upon the local administration. Also, the identification of

the rightful owners, the correction of earlier awards in terms of the directions of the

Hon’ble High Court, the submission of claims and payment of compensation and

obstacles created by encroachment have all led to the delay in possession of land

and the construction and final commissioning of the said package got delayed. The

Petitioner has taken efforts to expedite the possession of land parcels and to

complete the construction in those patches of land parcels in phases as and when

the possession of these parcels was obtained. We have, in paragraph 38 to

paragraph 46 of this order, examined the submissions of the Petitioner with regard to

the delay in the availability of land & site and the delay in execution of the General

Civil Works, consequent upon the non-availability of land, attributed to the change in

policy of State Government and Order of the Hon’ble High Court, and allowed the

additional capitalisation of the expenditure claimed by the Petitioner for the period

2015-19 under Regulation 14(3)(i) of the 2014 Tariff Regulations, for compliance with

the orders of the Hon’ble Court. Considering the fact that these are balance works

which have spilled over from 2018-19 and keeping in view that the Railway

Infrastructure Package, being an interdependent activity, contingent upon the

clearance of land acquisition issues, we hold, that the delay is on account of events

which are not attributable to the Petitioner. In our considered view, the delay due to

non-availability of land & site, which has caused the delay in the execution of the

General Civil Works for the period 2015-19, holds good for the delay in the

completion of Railway Infrastructure Package for the period 2019-21 also. For these

reasons, the projected additional capitalization of Rs.68506.24 lakh for ‘Railway

Infrastructure Package’ in 2020-21 and the projected additional capitalization of

Rs.4041.64 lakh (Rs.3881.64 lakh for cost of Land and Site and Rs.160.00 lakh for

Order in Petition No. 408/GT/2020 Page 109 of 178

 General Civil Works) in 2019-20 is allowed under Regulation 25(1)(a) of the 2019

Tariff Regulations. However, the total cost including cost disallowed for the year

2015-16 on Railway Package shall be considered and dealt on merits, after

prudence check, at the time of truing-up.

Projected additional capital expenditure under Regulation 25(2)(b) of the 2019

Tariff Regulations
186. Regulation 25(2)(b) of the 2019 Tariff Regulations provide as under:

“25(2) In case of replacement of assets deployed under the original scope of the
existing project after cut-off date, the additional capitalization may be admitted by the
Commission, after making necessary adjustments in the gross fixed assets and the
cumulative depreciation, subject to prudence check on the following grounds:
(a) xxxxxx;
(b) The replacement of the asset or equipment is necessary on account of change in
law or Force Majeure conditions;
xxxx”

187. The following additional capital expenditure has been claimed by the

Petitioner under Regulation 25(2)(b) of the 2019 Tariff Regulations:

(Rs. in lakh)
Sl. Head of work/ Equipment 2019-20 2020-21 2021-22 2022-23 2023-24
No.
1 Coal Mill Internals 0.00 100.00 200.00 200.00 0.00
2 Coal Mill Journal Assembly 0.00 200.00 300.00 300.00 0.00
3 Economiser Coil 0.00 1200.00 0.00 0.00 0.00
(both Upper & Lower Bank)
4 LTSH Coil 0.00 0.00 800.00 0.00 0.00
(both Upper & Lower Bank)
5 Refurbishment of Economiser 50.00 0.00 0.00 0.00 0.00
Coil Unit 2
6 Refurbishment of Economiser 50.00 0.00 0.00 0.00 0.00
Coil Unit1
7 Refurbishment of Pulverizer 100.00 0.00 0.00 0.00 0.00
Internals
8 Re-Heater Straight Tubes & 0.00 350.00 400.00 450.00 450.00
Bends
9 C.T.Fan Gearbox 0.00 200.00 0.00 0.00 0.00
10 Centrifugal compressor and 0.00 350.00 400.00 0.00 0.00
motor for BTG
11 Centrifugal Compressors for 0.00 300.00 300.00 300.00 300.00
Ash Plant
12 Replacement of Slew Hydraulic 0.00 0.00 159.87 0.00 0.00
Motor of Stacker cum Re-
claimer
13 Vacuum Pump 0.00 200.00 200.00 0.00 0.00

Order in Petition No. 408/GT/2020 Page 110 of 178

14 2 Numbers Flat top freezers @ 0.00 0.00 0.00 0.50 0.00
Aahar I
15 Godrej storewell 12 nos for GH 0.00 3.00 0.00 0.00 0.00
16 LG 230 litres fridge 5 numbers 0.00 1.50 0.00 0.00 0.00
17 Office chairs 0.00 25.00 0.00 0.00 0.00
18 Replacement of township ACs 0.00 0.00 50.00 0.00 0.00
19 IT equipment 82.93 0.00 0.00 0.00 0.00
20 Cooling Tower Internals - 100.00 100.00 100.00 100.00
21 Refurbishment of DM Plant 118.02 0.00 0.00 0.00 0.00
Piping and Tanks
22 Fabrication of expansion 46.90 40.07 0.00 0.00 0.00
bellows
23 Refurbishment of U1 & U2 HP 0.00 0.00 0.00 0.00 0.00
Bypass system
24 Re-heater Modification & MTM 191.47 0.00 0.00 0.00 0.00
installation

188. As regards the claim for additional capitalization on items/ assets like Coal Mill

Internals, Coal Mill Journal Assembly, Economiser Coil (both Upper & Lower Bank),

LTSH Coil (both Upper & Lower Bank), Refurbishment of Economiser Coil Unit 2,

Refurbishment of Economiser Coil Unit1, Refurbishment of Pulverizer Internals, Re-

Heater Straight Tubes & Bends, the Petitioner has submitted that due to poor quality

of coal, higher quantity of ash is generated and coarse type of ash is produced in the

generating station. It has also stated that due to the abrasive nature and more

quantity of ash, the life of these equipment has reduced and are, therefore, required

to be replaced. Accordingly, it has submitted that the replacements of these assets

are necessary on account of Force majeure conditions. The Respondent, KSEBL

has submitted that the amount claimed under this head mainly involves expenditure

projected for replacement of assets or equipment and is covered under R&M

expenses and, therefore, the claim may be rejected.

189. The matter has been considered. The 2019 Tariff Regulations do not contain

any provision for correlating the life of the asset/ equipment corresponding to the

quality of coal. Different generating stations use different quality of coal as per the

Fuel Supply Agreements (FSA) executed by them with coal companies, depending

Order in Petition No. 408/GT/2020 Page 111 of 178

upon the mine from which coal is procured. The Petitioner has based its claim of

replacement of assets to poor quality of coal that has led to higher generation of ash

apart from ash being coarse in nature. The Petitioner has submitted that due to

abrasive nature and higher quantity of ash, the life of equipment have reduced and,

therefore, are required to be replaced. The Petitioner has submitted that these

events (higher quantity and coarse nature of ash which being abrasive, have lowered

life of equipment/ asset) are Force majeure conditions. However, we note that the

Petitioner has not furnished whether the coal received at the generating station is as

per the provisions of FSA and as per the design coal considered at the time of

selection of the equipment/ technology. The Petitioner has also not mentioned if the

quality of coal being supplied is different from the one agreed in FSA with coal

companies and whether the matter has been taken up with coal companies.

Moreover, reduction in the life of equipment and replacement of the same due to

poor quality of coal, cannot qualify as a force majeure condition to be eligible for

grant of relief under Regulation 25(2)(b) of the 2019 Tariff Regulations. In view of

this, the projected additional capital expenditure claimed in this respect is not

allowed.

190. As regards the claim of the Petitioner under Regulation 25(2)(b) of the 2019

Tariff Regulations for additional capitalization of expenditure on items/ works such as

C.T. fan gearbox, Centrifugal compressor & motor for BTG, Centrifugal compressors

for Ash Plant, Replacement of slew hydraulic motor of stacker-cum-reclaimer,

Vacuum Pump, Refurbishment of U1 & U2 HP bypass system and Cooling tower

internals, the justification furnished by the Petitioner is as below:

C.T. Fan Gearbox

The Gear Boxes installed in Cooling Towers are operational since COD of the
units and in continuous operation over 8 years. Moreover, these gearboxes are
placed inside the Cooling tower cell, so they work under highly moist

Order in Petition No. 408/GT/2020 Page 112 of 178

 environment and probability of water ingress inside the gearbox is very high.
The combined effect of ageing and operating in highly moist environment has
resulted in more chances of premature failure as is also evident from past
records. Consequently, the unavailability of CT fan due to breakdown of Gear
Box can result in less cooling of hot circulating water from condenser, leading
to less condensation of inlet steam and increase in back pressure at turbine
exhaust. Higher back pressure means low vacuum which in-turn increases inlet
steam consumption and deteriorates heat rate of Turbine Generator (TG) cycle.
In worst case, the generation of the unit may also need to be reduced to
maintain vacuum and backpressure of the turbine. In view of the above facts
and to increase the availability and reliability of units for smooth, uninterrupted
power supply, it has been proposed for procurement of 50% of the total
installed gear boxes and internal gears to replace the existing ones. The cost of
Rs.2 Crore shall be incurred in 2020-21 for the same, which will avoid any
unavailability of cooling tower fans due to sudden breakdown of Gear Box in
running condition.

Centrifugal Compressor and motor for Boiler Turbine Generator

It is proposed to replace the existing screw compressors of BTG with
centrifugal compressors of suitable capacity. The proposal is based on the
running experience of screw compressors installed at site. Majority of screw
compressor manufacturers do not support site/local repairs and overhauls of
the screw elements instead recommend for replacement based on running
hours. As per the OEM, the expected service life is approximately 4 years
(32000 operating hours) for oil free air elements. To maintain reliability and
avoid unexpected failures, both the air ends are to be replaced as per
schedule. For installed capacity of 06 nos. of such compressors, material cost
of air ends alone works out to Rs.3 crore for every 6 years (considering Rs.50
lakh for 01 set of HP and LP screw elements). Over a remaining service period
they prove to be cost effective compared to procurement of capital spares for
such major overhaul of screw compressors every 4 years as recommended by
the OEM. The total cost of Rs.7.5 crore is estimated to be spent in 2 years i.e.
Rs.3.5 crore in 2020-21 and Rs.4 crore in 2021-22. In view of the envisaged
overall cost benefits from the proposed project, the capital expenditure for
installation of centrifugal compressors for BTG instrument and service air
requirements may kindly be approved.

Centrifugal Compressors for Ash Plant

Both Stage-I & II compressors are screw compressors and average life of such
compressors are 4-5 years or 40000 hours and require repair/replacement for
reliable operation. However, manufacturers of screw compressors do not
support site/local repairs and overhauls of the air elements of compressor
instead recommend for replacement based on running hours. As demonstrated
above, it is expected that the overall cost of such recurring replacement over

Order in Petition No. 408/GT/2020 Page 113 of 178

 remaining plant life would be higher compared to one-time capital expenditure
required for substituting screw compressors with centrifugal compressors. It is
proposed to undertake phase-wise replacement of Stage-I conveying Air
compressors by centrifugal compressor. The total project cost is estimated to
be Rs.12 crore which will be capitalized phase-wise in 2020-21, 2021-22, 2022-
23 and 2023-24.

Cooling Tower Internals

Over a period of continuous use under the highly moist environment the
combined with the effect of ageing has resulted in more chances of premature
failures of Cooling Tower Internals. Therefore, for reliable operation of cooling
tower healthiness of all components, viz, PVC fills, drive shaft, drift eliminators,
flow control butterfly valves and blades of axial flow fans of cooling tower is
very much essential. In view of the above facts and to increase availability and
reliability of units for smooth, uninterrupted power supply, it has been proposed
for procurement of IDCT internal spares of Rs.4 crore spread over 2020-21 to
2023-24 to replace the existing ones for smooth running of plant.

Refurbishment of U1 & U2 HP Bypass system

It is submitted that due to frequent failure of various components in the servo
valve, the reliability and availability of this critical system has reduced
drastically. Malfunction in the servo valve has led to inadvertent opening of the
HP bypass valve during normal operation of the unit leading to loss of
generation. Also, on many occasions due to blocking in these servo valves, the
bypass valves failed to open whenever required leading to delay in the Unit
start up or Unit shut down activity. Meanwhile, the Petitioner is working out to
figure out the root cause of such failures and solution for the same. After the
analysis, this expenditure may be incurred during 2019-20 to 2023-24 and,
therefore, it is requested to the Commission to grant liberty to the Petitioner to
seek capitalization against Refurbishment of HP bypass hydraulic servo system
under applicable regulations, subject to prudence check at the time of truing-up
exercise.

Replacement of slew hydraulic motor of stacker-cum-reclaimer

During reclaiming, abnormal pressure and speed variation has been observed.
In view of above observation, the OEM was called on-site to assess the
situation and rectify the issue. On inspection, heavy wear and tear of the
hydraulic system was observed and the OEM has advised to operate with 50%
reduced slewing motion and replacement of the slew hydraulic motor including
brakes. The observations and corrective measures as suggested by the OEM
has been recorded in the minutes of the meeting dated 8.3.2019 and minutes of
the meeting dated 2.7.2019. The total cost of the proposal would be of Rs.1.60
crore in 2021-22 and the same is based on the offer submitted by authorized
distributor.

Order in Petition No. 408/GT/2020 Page 114 of 178

 Vacuum Pump
The vacuum pumps have cast iron impellers which have a service life of about
5 year. The OEM (M/s Edwards ltd.) does not recommend any major welding
repairs on the impeller as it compromises the safety of impeller during
operation. One no spare vacuum pump available under project mandatory
spares was installed during annual over-hauling in place of 01 number pump
and local repair was made for the other pump. Similarly, heavy erosion was
also recorded at both the impellers at Unit 2 during its AOH in May, 2019.
Impeller blade and casing damage has occurred due to dislodging of the worn-
out blade causing permanent damage to other blades as well as the casing.
Therefore, the proposed capital expenditure of Rs.4 crore (Rs.2 crore in 2020-
21 and Rs.2 crore in 2021-22) for the procurement of vacuum pump may be
approved.

191. The submissions have been considered. The Petitioner, in justification of the

claim for the aforesaid items/ assets, has mainly submitted that these equipment are

required to be procured as ‘spares’ or on account of the fact that these items have

‘worn out’ or likely to be ‘unserviceable’ in due course of time. The Petitioner has

also submitted that OEM has recommended their replacement in place of repair or

change of the defective part. It is observed that in some of the cases, the Petitioner’s

claim is premised on poor quality of coal and in some cases, the claim is based on

the recommendations of OEM. These factors do not, in our view, constitute change

in law or a force majeure event, warranting any relief to the Petitioner. However, after

examining the justifications furnished by the Petitioner, it is observed that in case of

Centrifugal Compressor & motor for Boiler Turbine Generator and Centrifugal

Compressors for Ash Plant, the OEM has suggested the replacement owing to the

obsolescence/ unavailability of spares/ service support by OEM. In view of this, the

projected additional capitalization of Rs.750.00 lakh (Rs.350.00 lakh in 2020-21 and

Rs.400.00 lakh in 2021-22) for Centrifugal Compressor & motor for Boiler Turbine

Generator and Rs.1200.00 lakh (Rs.300 lakh during each year from 2020-24) is

allowed under Regulation 25(2)(c) of the 2019 Tariff Regulations. The Petitioner is

Order in Petition No. 408/GT/2020 Page 115 of 178

however, directed to furnish the recommendations of OEM at the time of truing-up of

tariff.

192. However, for other items such as coal mill internals, cooling tower internals,

economizer coil DM plant equipment, C.T fan gearbox etc. required to be replaced

before the life of plant due to wear/ tear, we hold that the failure/ replacement of

items does not fall under force majeure. However, replacement of such consumables

may be met from the capital spares and may be claimed under capital spare

consumption during truing up. In view of this, the additional capital expenditure

claimed by the Petitioner is not allowed. Further, the prayer of the Petitioner for

granting liberty to seek capitalization against ‘Refurbishment of HP bypass hydraulic

servo system’ at the time of truing-up shall be considered as per the merit and

provisions of regulations at the time of truing-up of tariff.

193. The Petitioner has also claimed additional capitalization for some minor

assets/ items like Flat top freezers (2 numbers), Godrej storewell (12 numbers for

guest house), office chairs, LG 230 litres fridge (5 numbers) and for replacement of

township ACs. As regards flat top freezers, the Petitioner has submitted that their

replacement is required as the existing units are not functioning properly due to

deteriorated condition. As regards Godrej storewell, it has been submitted that the

wooden setup of cupboards in DVC guest houses has deteriorated and a

replacement by Godrej steel cupboards will help in damage-free arrangements. For

office chairs, the Petitioner has stated that the replacement of chairs (including those

in conference rooms) for officers and guests to ensure proper ergonomics and safety

of individuals. In respect of LG 230 litres fridge, it has been submitted that as part of

providing basic amenities at project office, gate house, CHP, switchyard and

technical building pantry, the fridge, being used has completed its useful life and is

Order in Petition No. 408/GT/2020 Page 116 of 178

not commensurate with the useful life of the project. For replacement of township

ACs, the Petitioner has stated that all ACs are more than 7 years old and, therefore,

their replacement will be required by 2023-24 and will be done in a phased manner,

depending on the condition of the units at various blocks in township. The Petitioner

has contended that these minor items have life cycle of 7-8 years and need recurrent

replacement. It has stated that the provision for Compensation Allowance that

existed in the 2014 Tariff Regulations to compensate for addition of minor assets, is

not there in the 2019 Tariff Regulations. Hence, the Petitioner has stated that there is

no specific provision to claim the expenses for minor asset additions, which are

important for the power plant and significant cost of Rs.0.81 crore is expected to be

incurred during the 2019-24 tariff period. Accordingly, the Petitioner has submitted

that the additional capitalization of these assets may be allowed in exercise of power

vested under Regulation 76 read with Regulation 25(2)(b) of the 2019 Tariff

Regulations. The submissions of the Petitioner have been considered. Since the

additional capital expenditure claimed by the Petitioner do not relate to the operation

of the generating station and are minor in nature, the claim for additional

capitalization under Regulation 25(2)(b) of the 2014 Tariff Regulations is not allowed.
1

Projected additional capitalisation of the expenditure under Regulation 25(2)(c)

of the 2019 Tariff Regulations

194. The following additional capital expenditure has been claimed by the

Petitioner in respect of assets/ works, which are within the original scope of work of

the project, but after the cut-off date, under Regulation 25(2)(c) of the 2019 Tariff

Regulations:

(Rs. in lakh)
Sl. Head of work / Equipment 2019-20 2020-21 2021-22 2022-23 2023-24
No.
1 Induced Draft fan motor with 0.00 450.00 450.00 450.00 450.00
Variable Frequency Drive
replacement

Order in Petition No. 408/GT/2020 Page 117 of 178

 2 Laboratory Instruments 0.00 21.94 57.08 52.90 22.11
3 Replacement of Battery 0.00 80.00 80.00 90.00 -
4 Up-gradation of CHP main 0.00 60.00 0.00 0.00 0.00
PLC
5 Up-gradation of DMP PLC 0.00 50.00 0.00 0.00 0.00
6 Up-gradation of Raw water 0.00 50.00 0.00 0.00 0.00
PLC

195. Regulation 25(2)(c) of the 2019 Tariff Regulations provides as under:

“25. Additional capitalization within the original scope and after the cut-off date:
(2) In case of replacement of assets deployed under the original scope of the existing
project after cut-off date, the additional capitalization may be admitted by the
Commission, after making necessary adjustments in the gross fixed assets and the
cumulative depreciation, subject to prudence check on the following grounds:
(c) The replacement of such asset or equipment is necessary on account of
obsolescence of technology; and...”

Induced Draft fan motor with Variable Frequency Drive replacement

196. The Petitioner has claimed additional capitalization of Rs.1800.00 lakh

(Rs.450.00 lakh in 2020-21, Rs.450.00 lakh in 2021-22, Rs.450.00 lakh in 2022-23

and Rs.450.00 lakh in 2023-24) for Induced Draft fan motor with Variable Frequency

Drive replacement under Regulation 25(2)(c) of the 2019 Tariff Regulations. The

Petitioner has submitted that the said item/ asset was supplied by M/s BHEL and is

in service for more than 7 years. It has submitted that there have been multiple

instances of channel tripping in the past, leading to loss of generation and reliability

and from past records and minutes recorded in MoM dated 3.8.2019 with M/s BHEL,

a tripping of particular LCI channel continued for more than 15 days in presence of

BHEL supervisory engineer and the tripping count reached to more than 40 days. In

view of the technological obsolescence, the recommendation of OEM for up-

gradation and to address issue of present unreliability of the system, the Petitioner

has proposed to retrofit the existing system with the latest technology, having

improved diagnostic features and to achieve reliable and sustainable operation of ID

fan.

Order in Petition No. 408/GT/2020 Page 118 of 178

197. The matter has been examined. The Petitioner has submitted that there have

been multiple instances of channel tripping in the past and has referred to the MoM

dated 3.8.2019 with OEM. On scrutiny of various correspondences made by the

Petitioner with OEM, we find that the replacement of the asset was based on the

expert opinion of the OEM as recorded in the said MoM. In view of this, the claim of

the Petitioner for additional capitalization of Rs.450.00 lakh in 2020-21, Rs.450.00

lakh in 2021-22, Rs.450.00 lakh in 2022-23 and Rs.450.00 lakh in 2023-24 for the

said asset is allowed along with the corresponding decapitalization of Rs.284.43 lakh

in 2020-21, Rs.271.56 lakh in 2021-22, Rs.259.28 lakh in 2022-23 and Rs.247.55

lakh in 2023-24. The Petitioner is, however, directed to furnish the obsolescence

certificate from the competent authority at the time of truing-up of tariff.

Laboratory Instruments

198. The Petitioner has claimed projected additional capitalization of Rs.154.03

lakh (Rs.21.94 lakh in 2020-21, Rs.57.08 lakh in 2021-22, Rs.52.90 lakh in 2022-23

and Rs.22.11 lakh for 2023-24) for Laboratory Instruments under Regulation 25(2)(c)

of the 2019 tariff Regulations. The Petitioner has submitted that ‘laboratory

instruments’ are getting old i.e. more than 8 to 10 years and new instruments need to

be procured. It has also stated that laboratory Instruments presently in service at

site, are quite old and have outlived their service life. The Petitioner has also

submitted that some of these machines are slow in response and hang quite

frequently and spares and service support for old machines are restricted due to

component obsolescence. The Petitioner has further stated that OEM has declared

the obsolescence of most spares and that most of the instruments cannot be

serviced or repaired due to non-availability of spares, change in software and

technology development (as the same have become obsolete in market). The

Order in Petition No. 408/GT/2020 Page 119 of 178

Petitioner has submitted that in view of the said constraints i.e., obsolescence of the

laboratory equipment and criticality of the system for plant operations, the Petitioner

has no choice but to go for complete up-gradation of the entire system to higher

version as recommended by OEM in a phased manner from 2020-21 to 2023-24. It

has stated that an estimated additional expenditure of Rs 154 lakh, as per initial

offer, spread over the years 2020-21 to 2023-24 is required for up-gradation of

Laboratory Instruments.

199. The matter has been examined. The Petitioner has stated that the OEM has

declared obsolescence of most spares and that most of the instruments cannot be

serviced or repaired due to non-availability of spares, change in software and

technology development. The relevant portion of the said recommendation is as

under:

“This is to confirm that some of the instruments mentioned below from the order
cannot be serviced or repaired due to non-availability of spares, change in software
and technology development because they became obsolete in market, thus it makes
highly impossible to keep them in working condition…………………..
So we recommend you to upgrade the laboratory with new instruments in order to
maintain a better performance to minimize downtime”

200. The Petitioner has also referred to the correspondence made with M/s Orbit

Technologies Limited with regard to the non-availability/ obsolescence of some of

the items like PH meter, turbidity meter, conductivity meter, LPG gas cylinder

&regulator, hot air oven, bomb calorimeter etc., and that the laboratory spares could

not be serviced or repaired due to non-availability of spares, change in software and

technology development. We, therefore, find merit in the claim of the Petitioner and

accordingly allow the projected additional capitalization of Rs.154.03 lakh (Rs.21.94

lakh for 2020-21, Rs.57.08 lakh for 2021-22, Rs.52.90 lakh for 2022-23, Rs.22.11

lakh for 2023-24) for Laboratory Instruments under Regulation 25(2)(c) of the 2019

Tariff Regulations.

Order in Petition No. 408/GT/2020 Page 120 of 178

Replacement of Battery

201. The Petitioner has claimed projected additional capitalization of Rs.250.00

lakh (Rs.80.00 lakh for 2020-21, Rs.80.00 lakh for 2021-22 and Rs.90.00 lakh for

2022-23) towards Replacement of battery under Regulation 25(2)(a) read with

Regulation 25(2)(c) of the 2019 Tariff Regulations along with the corresponding

unrecovered depreciation value of the assets. The Petitioner has submitted that in

case of system blackout, batteries feed the Direct Current (DC) equipment of the

plant and switchyard equipment such as Emergency Oil Pump (EOP), Lube Oil

Pump (LOP), Jacking Oil Pump (JOP) and Emergency lighting, thereby ensuring the

safe shutdown of the plant and safe operation of the switchyard equipment. The

Petitioner has submitted that as per OEM, the serviceable life of these battery sets is

8 to 10 years under normal application. It has also stated that the existing 220 V and

48 V battery banks have been supplied by M/s Exide/ M/s HBL and in view of the

obsolescence, as confirmed by OEMs and to avoid criticality of the system for plant

operation, it is necessary to replace the existing battery sets with new ones for

improving the overall reliability of DC system. The Petitioner has, therefore,

proposed to replace these battery sets as they will complete their useful life by 2020-

2021 and has accordingly proposed the aforesaid additional expenditure for

replacement of these battery banks.

202. The matter has been examined. It is observed that the claim of the Petitioner

regarding obsolescence of these batteries has not been duly supported by OEM

certificate. It is, however, noticed that OEM in its letters has confirmed the life of

these batteries to be around 10-12 years and that the batteries form part of the

essential safety system against tripping of the plant. As the useful life of these assets

(batteries), which gets completed during the 2019-24 tariff period, are not

Order in Petition No. 408/GT/2020 Page 121 of 178

commensurate with the useful life of the project, the projected additional

capitalization for ‘Replacement of Battery’ is allowed along with adjustment of de-

capitalization and depreciation under Regulation 25(2)(a) of the 2014 Tariff

Regulations, subject to truing-up based on actuals.

Up-gradation of Coal Handling Plant Main PLC, Up-gradation of DMP PLC, and
Up-gradation of Raw Water PLC

203. The Petitioner has claimed projected additional capitalization of Rs.160.00

lakh (Rs.60.00 lakh for PLC of CHP, Rs.50.00 lakh for PLC of DMP and Rs.50.00

lakh for PLC of Raw water) in 2020-21 for Up-gradation of PLC in terms of

Regulation 25(2)(c) of the 2019 Tariff Regulations and has submitted the following:

(a) Up-gradation of Coal Handling Plant main PLC: The Programmable Logic
Control (“PLC”) system consists of Measurement and Closed Loop/ Open Loop
Control system (‘CLCS’ and ‘OLCS’), Data bus system, Operator workstations,
Engineer workstation, Software including data diagnostics and data bus system
with Control and Communication with the process. The workstations Human
Machine Interface (HMI) supplied with PLC system is based on Microsoft
Windows XP Operating platform. Microsoft has declared Windows XP as
obsolete and has withdrawn the support for all XP based systems including
automatic security updates. In the absence of such support from Microsoft one
cannot update the critical virus definition files and, thus, makes the system
vulnerable for the system security. Hence, the system needs up-gradation to
higher version of Windows platform to ensure improved reliability and availability.
The OEM in its life cycle report on installed PLC -HMI System at CHP has
strongly recommended immediate attention on migration from Windows XP to
Windows 10 Professional Operating System, owing to technological
obsolescence. Accordingly, it is proposed to incur amount of Rs.0.60 crore in
2020-21.

(b) Up-gradation of DMP PLC: The availability of this PLC system is very
important for the smooth and normal operation of the generating unit. This
system is based on Windows XP operating system and at that time (when the
agreement was inked in with M/s BGR Energy) Windows XP operating system
was the most popular and reliable Windows platform provided by all leading
industrial automation companies for their control system. As Microsoft has
withdrawn the support for Windows XP operating system, the Petitioner needs to
upgrade the PLC to higher version of Windows. Since spares and services
support for the old XP machines are restricted due to component obsolescence,

Order in Petition No. 408/GT/2020 Page 122 of 178

 it is necessary to upgrade the XP based PLC system to higher version of
Windows platform. The OEM, in its life cycle report has strongly recommended
upgrading the obsolete portion of the system, retaining majority of existing
hardware along with panels, etc. Since there is not going to be any major
hardware or software modification, the up-gradation work can be carried out in
smooth manner in normal planned shutdowns of the plant. It is, therefore,
proposed to incur an amount of 0.50 crore in 2020-21 on account of technology
obsolescence/non-support by the OEM.

(c) Up-gradation of Raw Water PLC: The workstations (HMI) supplied with
PLC system is based on Microsoft Windows XP Operating platform. Microsoft
has declared Windows XP as obsolete and has withdrawn the support for all XP
based systems including automatic security updates. In the absence of such
support from Microsoft, one cannot update the critical virus definition files and,
thus, makes the system vulnerable for the system security. Hence, the system
needs up-gradation to higher version of Windows platform to ensure improved
reliability and availability. HMI systems presently in service at site are quite old
and have outlived their service life. Some of these machines are slow in
response and hang quite frequently. Spares and services support for the old
machines are restricted due to component obsolescence. Workstations
presently available in the market are with latest Windows OS and these current
machines are not one to one interchangeable with the existing old machines
presently in use. The OEM in its life cycle report strongly recommended to up-
grade the obsolete portion of the system, retaining majority of existing hardware
along with panels, etc. It is, therefore, proposed to incur an amount of Rs.0.50
crore in 2020-21 on account of technology obsolescence/non-support by OEM.

204. The submissions have been considered. It is evident from the submissions of

the Petitioner that PLC installed in the Coal Handling Plant, DMP PLC, Raw Water

PLC have become obsolete as Microsoft has declared Windows XP as obsolete and

had withdrawn its support for all Windows XP based systems. The Petitioner has

furnished the OEM recommendations in support of its claim for obsolescence of

PLC. In view of this, we allow the total projected additional capitalization of

Rs.160.00 lakh in 2020-21 under Regulation 25(2)(c) of 2019 Tariff Regulations.

205. In addition, the Petitioner has also claimed additional capitalization for new

schemes like Augmentation of ash handing system, Max DCS version up-gradation

(XP) Unit-2, Refurbishment of DM Plant Piping and Tanks, IT Equipment, Re-heater

Order in Petition No. 408/GT/2020 Page 123 of 178

Modification & MTM installation and Fabrication of expansion bellows, during 2019-

20 and 2020-21. In justification of the same, the Petitioner has submitted that these

new schemes, could not be completed within the 2014-19 tariff period due to various

factors viz. (i) changes in schedule of annual maintenance plan or duration of

maintenance plan of units, (ii) limited days of the annual outage and (iii) technical

constraints etc. The Petitioner has submitted that such small deviations in capital

investment are inevitable and there is nil or insignificant impact on the overall project

cost. The Petitioner has further submitted detailed submissions in justification for the

additional capitalization claimed for these new schemes during the 2014-19 tariff

period. Accordingly, the Petitioner has stated that the capitalization of these

schemes has been phased during 2019-20 and 2020-21 and that the same may be

allowed under Regulations 25(2)(b) and 25(2)(c) read with Regulation 76 of the 2019

Tariff Regulations.

206. The Respondent, KSEBL has submitted that carry forward of schemes

approved for 2014-19 period may not be allowed as there is no provision in the 2019

Tariff Regulations to claim such expenditure for the 2019-24 tariff period.

207. We have examined the matter. The Petitioner has claimed additional

capitalization of the aforesaid schemes which are beyond the original scope of work

of the project (apparently on the ground of force majeure condition), stating that

these schemes have been carried forward from the 2014-19 tariff period on various

factors. It has also relied upon the submissions made in respect of these schemes

during the 2014-19 tariff period. It is noticed that the claim of the Petitioner for

additional capitalization towards ‘Augmentation of ash handling system’ for

Rs.700.13 lakh in 2017-18 and Rs.848.07 lakh in 2018-19 was allowed under

Regulation 14(3)(ii) of the 2014 Tariff Regulations as the same was for safety of

Order in Petition No. 408/GT/2020 Page 124 of 178

environment and based on the directions of JSPCB. Since the additional capital

expenditure is for compliance with existing law, we allow the same under Regulation

26(1)(a) of the 2019 Tariff Regulations. As regards the additional capitalization

claimed for new scheme viz. Max DCS version up-gradation (XP) Unit-2for

Rs.450.00 lakh in 2019-20, it is noticed that the Petitioner had claimed the additional

capitalization of Rs.67.52 lakh in 2015-16 and Rs.438.86 lakh 2017-18 mainly on the

ground that M/s BHEL had stopped extending its support after mid-2016 and had

strongly recommended to upgrade to higher versions. Considering the fact that the

Petitioner had incurred the said expenditure under unavoidable circumstances, the

additional capital expenditure claimed has been allowed during the years 2015-16

and 2017-18 in this order. Accordingly, we allow the additional capitalization of the

said expenditure for Rs.450.00 lakh in 2019-20 under Regulations 25(2)(c) and

25(2)(d) of the 2019 Tariff Regulations, as the same is in continuation of the

schemes carried out and claimed during the 2014-19 tariff period.

208. However, in respect of other schemes like Refurbishment of DM Plant Piping

and Tanks, IT Equipment, Re-heater Modification & MTM installation and Fabrication

of expansion bellows during 2019-20 and 2020-21, it is noticed that the claim of the

Petitioner had been disallowed during the 2014-19 tariff period. Also, justification

furnished by the Petitioner in support of the claim that it is due to change in law or

force majeure are not justifiable. In view of this, the claim of the Petitioner for

additional capitalisation of these assets is not allowed.

Projected additional capital expenditure under Regulation 26(1) of the 2019

Tariff Regulations

209. The Petitioner has also claimed projected additional capital expenditure for

various assets/ works which are beyond the original scope of work of the project

Order in Petition No. 408/GT/2020 Page 125 of 178

under sub-clauses (a), (b), (c) and (d) of clause (1) of Regulation 26 of the 2019

Tariff Regulations, which provide for the following:

“26. Additional Capitalisation beyond the original scope

(1) The capital expenditure, in respect of existing generating station or the
transmission system including communication system, incurred or projected to be
incurred on the following counts beyond the original scope, may be admitted by
the Commission, subject to prudence check:
(a) Liabilities to meet award of arbitration or for compliance of order or
directions of any statutory authority, or order or decree of any court of law;
(b) Change in law or compliance of any existing law;
(c) Force Majeure events;
(d) Need for higher security and safety of the plant as advised or directed by
appropriate Indian Government Instrumentality or statutory authorities
responsible for national or internal security;
(e) xxxxxx..”

210. The following projected additional capital expenditure claimed by the

Petitioner for the assets/ works under Regulation 26(1)(a) of the 2019 Tariff

Regulations for the years 2019-20 and 2020-21 are examined below:

(Rs. in lakh)
Asset/Work 2019-20 2020-21
Implementation of Automatic Generation Control 80.00 -
system
Soak-pit for Station Transformer in switchyard. 40.00 -
Up-gradation of ABT for RRAS & SCED - 75.00
Implementation of Automatic Generation Control system
211. The Petitioner has claimed projected additional capitalization of Rs.80.00 lakh

in 2019-20 towards implementation of Automatic Generation Control (AGC) system

under Regulation 26(1)(a) of 2019 Tariff Regulations. In justification for the same, the

Petitioner has pointed out that the Commission vide its order dated 28.8.2019 in

Petition No.319/RC/2018 (NLDC v NTPC & Ors.) regarding Automatic Generation

Control (AGC) implementation in India has issued the following directions:

“34 (i)All thermal ISGS stations with installed capacity of 200 MW and above and all
hydro stations having capacity exceeding 25 MW excluding the Run-of-River Hydro
Projects irrespective of size of the generating station and whose tariff is determined or
adopted by CERC are directed to install equipment at the unit control rooms for
transferring the required data for AGC as per the requirement to be notified by the

Order in Petition No. 408/GT/2020 Page 126 of 178

 National Load Despatch Centre (NLDC). NLDC shall notify the said requirements
within one month of this order”

212. The Petitioner has submitted that pursuant to the aforesaid order dated

28.8.2019, Power System Operation Corporation Limited (POSOCO)/ NLDC vide

letter dated 17.9.2019 has notified to the generating stations, the requirements for

AGC connecting equipment along with the list of plants identified for monitoring by

NLDC, which includes the generating station of the Petitioner. The Petitioner has

further submitted that NLDC in its letter, has sought details from the Petitioner

regarding the infrastructure for meeting the specified requirements and the

arrangements to be completed by the power plants before 31.1.2020, so that the

AGC system is put in place before 28.2.2020, in terms of the Commission’s order

dated 28.8.2019 in Petition No.319/RC/2018. Based on this, the Petitioner has

sought the approval of the additional capital expenditure for Rs.80 lakh in 2019-20 as

per initial offer (and based on pilot projects implemented in NTPC generating

stations) for implementation of AGC in the generating station of the Petitioner, under

Regulation 26(1)(a) of the 2019 Tariff Regulations. Since the projected additional

capital expenditure claimed by the Petitioner for Rs.80 lakh in 2019-20 is in terms of

the directions of NLDC, based on the Commission’s order dated 28.10.2019 in

Petition No.319/RC/2019, we allow the same under Regulation 26(1)(a) of the 2019

Tariff Regulations.

Soak-pit for Station Transformer in switchyard

213. The Petitioner has claimed projected additional capitalization of Rs.40.00 lakh

in 2019-20 towards ‘Soak Pit for Station Transformer in switchyard’ under Regulation

26(1)(a) of the 2019 Tariff Regulations. The Petitioner has submitted that ‘soak pit’

proposed for the station transformer in switchyard is for compliance with Regulation

44 of the CEA (Measures relating to Safety and Electric Supply) Regulations, 2010.

Order in Petition No. 408/GT/2020 Page 127 of 178

The Petitioner has enclosed copy of CEA report dated 5.6.2018 and has submitted

that since there is presently no such arrangement for Station Transformers in the

generating station of the Petitioner, the Regional Inspectoral organization of the

CEA, had noticed the deficiency (in sl. no. 5 of the report dated 5.6.2018) and has

directed the Petitioner for compliance with the same. Therefore, in order to comply

with the existing regulations of CEA, the Petitioner has projected additional capital

expenditure of Rs.40 lakh in 2019-20 for Soak Pit for station transformer in

switchyard under Regulations 26(1)(a) and 26(1)(b) of the 2019 Tariff Regulations.

214. The matter has been examined. Regulation 44 of the CEA (Measures relating

to Safety and Electric Supply) Regulations, 2010 mandates the following:

“Regulation 44: Use of electricity at voltage exceeding 650 V. Provisions shall be

made for suitable oil soak pit and where use of more than 9000 litres of oil in any one
oil tank, receptacle or chamber is involved, provision shall be made for the draining
away or removal of any oil which may leak or escape from the tank, receptacle or
chamber containing the same.”

215. The Regulations of CEA mandating suitable soak oil pit for station transformer

was notified during the year 2010, which is much before COD of the generating

station (in 2012) and the deficiency has been pointed out by CEA in its report dated

5.6.2018. Therefore, the Petitioner should have complied with requirements of CEA

Regulations at the time of COD of the generating station. However, since the claim

of the Petitioner is towards compliance with existing law, we allow the projected

additional capitalization for Rs.40 lakh in 2019-20 for the said asset/ work. At the

time of truing-up, the Petitioner shall submit reasons for the delay/ deferment of the

work.

Up-gradation of ABT system for RRAS & SCED

216. The Petitioner has claimed projected additional capitalization of Rs.75 lakh in

2020-21 for up-gradation of ABT system for RRAS & SCED under Regulation

Order in Petition No. 408/GT/2020 Page 128 of 178

26(1)(a) of 2019 Tariff Regulations. In justification of the same, the Petitioner has

submitted that it has an online system for monitoring and controlling schedules, as

advised by Eastern Region Load Despatch Centre (ERLDC) which is named as

Availability Based Tariff (ABT) system. It has stated that the core of ABT System is

energy meters, which are of L&T make and the software was developed by M/s CMS

computer Ltd. about 8 years ago. The Petitioner has pointed out that with the

implementation of Reserve Regulation and Ancillary Services (RRAS) and Security

Constrained Economic Dispatch (SCED), the schedule is revised every 15 minute

time-block as compared to the earlier revision after 4 time-blocks. It has stated that

all revision of schedule has to be updated in the server manually and the same is

then reflected in the display screen for necessary action by the operation engineers.

The Petitioner has stated that with the implementation of RRAS and SCED, it has

become difficult for it to maintain proper manual updating of scheduled generation in

ABT system to re-align with ERLDC schedule, as the cushion time for manual entry

is no more available. The Petitioner has submitted that the Commission in its order

dated 16.7.2018 in Petition No 7/SM/2018, has endorsed the 5-minute scheduling,

metering, accounting and settlements and has also implemented the same on a pilot

basis and has also recommended that all future procurements of energy meter

should have recording at 5-minute interval. In this regard, the Petitioner has stated

that at present L&T meters in the generating station of the Petitioner do not have

registers to capture the 5-minute data and, accordingly, it has to be replaced with

new meters, in which block duration is programmable and can be adjusted from 15

minutes to 5 minutes, to be future ready and compliant with the 5-minute data

requirements as may be required in near future. Accordingly, the Petitioner has

projected additional capitalization of Rs 75 lakh in 2020-21, as per initial offer, in

Order in Petition No. 408/GT/2020 Page 129 of 178

accordance with the observations of the Commission in its order dated 16.7.2018 in

Petition No. 7/SM/2018 under Regulation 26(1)(a) of the 2019 Tariff Regulations.

217. The matter has been considered. Up-gradation of the existing ABT system for

RRAS & SCED is required to comply with the changing scenario, to update the

revised schedules from ERLDC. As the requirement for up-gradation of the existing

ABT system for RRAS and SCED is pursuant to the Commission’s order dated

16.7.2018 in Petition No 7/SM/2018, the claim of the Petitioner for projected

additional capitalization of Rs.75 lakh in 2020-21 is allowed under Regulation

26(1)(a) of the 2019 Tariff Regulations.

Facility creation for workmen (Rest Room, Toilet & Drinking water point),
Drivers rest room, Drinking water facility and workers pathway

218. The Petitioner has claimed projected additional capitalization of Rs.19.77 lakh

in 2019-20 for Drinking water facility, Rs.5.00 lakh in 2020-21 for Drivers rest room,

Rs.150.00 lakh in 2020-21 for Workers pathway and Rs.150.00 lakh (Rs.37.50 lakh

each from 2020-21 to 2023-24) for Facility creation for Workmen (Rest Room, Toilet

& Drinking water point) under Regulation 26(1)(b) of the 2019 Tariff Regulations. In

justification of the same, the Petitioner has submitted the following:

a) Facility creation for workmen (Rest room, Toilet & Drinking water point):
As FGD and Railway system is envisaged, commensurate increase in work force
is expected and the existing facilities might fall short or might be far from the
construction place as per Factories Act. So, in order to ensure hygienic and safe
environment for workers, more Rest rooms, Toilets and drinking water points are
needed. An estimated expenditure of Rs.150 lakh as per initial offer, (Rs.37.50
lakh each spread over the years 2020-21 to 2023-24) is proposed to be incurred
for development of such facilities.

b) Workers Pathway: For protection from heat in summer and rain during
monsoon season for workers commuting from Gate house to workplace with
distance ranging from 2-5 kms, two sitting sheds between Raahi bridge and
Aahar-3 (CHP) are needed. Also, long sheds between Gate house-2 to BTG
area and between material gate to technical building parking area are required.
This would ensure proper working environment for workers. An estimated

Order in Petition No. 408/GT/2020 Page 130 of 178

 expenditure of Rs.150 lakh is initially proposed to be incurred in 2020-21 for
development of such facilities. The above requirements are for compliance with
the Section 18, Section 19 and Section 47 of the Factories Act, 1948, which
mandate to provide drinking water facilities, toilets, shelters, rest rooms and
lunchrooms in a factory.

219. The Petitioner has referred to Section 18, Section 19 and Section 47 of the

Factories Act, 1948, which mandate to provide drinking water facilities, toilets,

shelters, rest rooms and lunchrooms in a factory and has claimed the projected

additional capitalization of these assets/ works under Regulation 26(1)(b) of the 2019

Tariff Regulations. In our view, the additional expenditure claimed by the Petitioner is

in the nature of revenue expenditure and the same can be met from the O&M

expenses allowed to the generating station under the 2019 Tariff Regulations.

Accordingly, the projected additional capital expenditure of Rs.19.77 lakh in 2019-20

for Drinking water facility, Rs.5.00 lakh in 2020-21 for Drivers rest room, Rs.150.00

lakh during 2020-21 for Workers pathway and Rs.150.00 lakh (Rs.37.50 lakh each

for the years 2020-21 to 2023-24) for Facility creation for workmen (Rest room, Toilet

& Drinking water point) is not allowed.

220. The Petitioner has also claimed projected additional capitalization for various

assets/ works like BCN 7 (Yard conveyor) modification, Chute Interconnection in 4A

to 6B & 4B to 6A (Rs.5 lakh in 2021-22), Common C.W. Pump for Units-1&2 (Rs.300

lakh in 2021-22), Economiser Coil Repairing Bay with Shed (Rs.600 lakh in 2020-

21), Installation of Suspended Magnet (Rs.52 lakh in 2019-20), Workshop for

Electrical Maintenance Department (EMD) (Rs.5 lakh in 2020-21) and certain Minor

assets, under Regulation 26(1)(c) (Force Majeure events) of the 2019 Tariff

Regulations and has submitted the following:

a) BCN 7 (Yard Conveyor) Modification: The Petitioner has submitted that it

has observed during stacking/reclaiming from mid-zone 3 and zone 4, M2
motor trips and, thereafter, it is required to be manually unloaded before it can

Order in Petition No. 408/GT/2020 Page 131 of 178

 be restarted, hampering the operation of Coal Handling Plant (CHP). The root
cause analysis was carried out by in-house diagnostic team and it was found
that inadequate tension in the belt, as the primary cause for such tripping and
it was recommended to add extra counterweight to overcome the problem and
structural changes to accommodate the extra counterweight. The Petitioner
seeks liberty to allow the Petitioner to approach the Commission in case the
capital expenditure becomes unavoidable for reliable operation of the plant.

b) Chute Interconnection in 4A to 6B & 4B to 6A: Normally CHP is equipped

with two parallel conveyors with interconnectivity for ensuring redundancy.
However, as per existing configuration, the belt conveyors, just after the
crushers, have no cross interconnectivity between them leading to no
interchange of coal flow from A stream to B Stream or vice versa. Therefore,
presently the system reliability depends upon 3 streams, i.e., (BCN 4A/B, 6A/B
& 8A/B) which are in series. It was envisaged to have 2 nd reversible stacker-
cum-reclaimer in the second phase of the project along the BCN 5- the Yard
conveyor and discharge chutes extending up to BCN 6A/B. Since, Phase 2 of
the project looks uncertain; it is now proposed to construct a new
interconnecting chutes between BCN 4A/B and 6A/B to improve the overall
BCN-4A/6A & 4B/6B route availability from 65% (as per 2019 data) to 85%
while stacking. Accordingly, the expenditure of Rs.5 lakh is projected for year
2021-22.

c) Common C.W. Pump for Units-1&2: Each unit of the generating station is
having three numbers of Cooling Water (CW) pumps with all of them in
running configuration without any standby. So, the non-availability of CW
Pump has direct consequence on the reliability of the generation unit. This
standby pump will also ensure regular preventive maintenance of CW Pumps
and, hence, unit reliability will increase. Accordingly, the additional
capitalization projected for the standby pump is Rs.300 lakh for 2021-22.

d) Economiser Coil Repairing Bay with Shed: Economiser coils suffer

maximum erosion loss of tubes due to coarse high ash content in coal ranging
from 40% to 46%. Because of heavy erosion, the units have suffered 16
numbers of Boiler tube leakages at economizer section since the COD of both
the units. During shutdowns, these coils need to be taken out from the boiler
for safe and careful inspection and repair. Thus, to facilitate safe and thorough
inspection of the economizer coil, a maintenance bed is required for
positioning of the damaged coils for inspection, repair, testing and proper
stacking in the bay, for future use, in successive overhauls. The projected
additional capital expenditure is Rs.600 lakh to be incurred in 2020-21, for
construction of above facility.

e) Installation of Suspended Magnet: As part of the CHP, there are Inline

Magnetic Separators (ILMS) (1 number on each belt) installed at the discharge

Order in Petition No. 408/GT/2020 Page 132 of 178

 point of conveyor (BCN-3A/3B) which discharges coal to the crusher (Ring
Granulators). In order to control the frequent tripping of conveyor due to MDT
sensing both types of metals and to eliminate the possibility of metal pieces
entering the crusher, it is required to install a trolley mounted suspended
electromagnet prior to the MDT. Therefore, the projected additional capital
expenditure to be incurred is Rs.52 lakh in 2019-20, for the procurement and
installation of suspended magnet.

f) Workshop for Electrical Maintenance Department (EMD): Due to space

constraint at the present common workshop, there is no fixed allocated space
for maintenance activities of electrical department. The availability of
centralized space shall facilitate the overhauling of all types of High Tension &
Low Tension motors, 400 kV breakers and other electrical equipment’s at
single location, which would help the Petitioner to improve the quality of work,
ensure safe environment for workers and also to manage resources, ultimately
leading to lower downtime. In view of the above, a workshop for EMD is
proposed to be set up at a projected additional capital expenditure of Rs.5
lakh in 2020-21.

g) Minor assets like Covered parking block at township, Industrial kitchen

setup at MA-2, Modernization of gym, Rooftop cafeteria and Community
hall, Six seater dining table for workers, Electric vehicle (cart) for Staff
visitors movement: Many minor items highlighted below have life cycle of 7-8
years and these items need recurrent replacement. The provision of
compensation allowance which was included in the 2014 Tariff Regulations to
compensate for minor asset addition, has now been removed in the 2019
Tariff Regulations and, thus, there is no specific provision to permit the
expenses for minor asset additions.

221. It is observed that the projected additional capital expenditure claimed by the

Petitioner in respect of these assets/ works [(a) to (g) above], mainly pertain to

addition of new equipment to the existing set-up either as a standby or for

incorporation of new facilities. Though the Petitioner has claimed additional

capitalization of these works/ assets based on ‘force majeure’ conditions, it has not

established the presence of any such force majeure events to consider the claims

made as above. Since no case for force majeure events have been made out by the

Petitioner, the claim for assets/ works like BCN 7 (Yard conveyor) modification,

Chute Interconnection in 4A to 6B & 4B to 6A, Common C.W. Pump for Units-1&2,

Order in Petition No. 408/GT/2020 Page 133 of 178

Economiser Coil Repairing Bay with Shed, Installation of Suspended Magnet,

Workshop for Electrical Maintenance Department (EMD) and certain Minor assets,

claimed under Regulation 26(1)(c) of the 2019 Tariff Regulations is not allowed.

Also, the prayer of the Petitioner to grant liberty to approach the Commission in case

the additional capital expenditure for BCN 7 (Yard conveyor) modification becomes

unavoidable is rejected.

Augmentation of store and Coal pit run-off mechanised Drainage System

222. The Petitioner has claimed projected additional capitalization of Rs.329.26

lakh for Augmentation of store and Rs.399.53 lakh for ‘Coal Pit Run-off mechanized

drainage system’ in 2019-20 under Regulation 26(1)(c) of the 2019 Tariff

Regulations. The Petitioner has submitted the following as regards augmentation of

store:

“These are the ‘carry forward schemes beyond the original scope of work’. Few
schemes that were envisaged for the control period 2014-19 could not be completed
within the control period due to various reasons beyond the control of the Petitioner.
The capitalization towards these schemes got carried forward to control period 2019-
24. The relevant regulations under which the capitalization for such schemes are
Regulation 26(1)(c) read with Regulation 3(25) and Regulation 76 of the 2019 Tariff
Regulations. The above mentioned items are claimed under specific provisions of the
2019 Tariff Regulations and justifications are provided in the truing-up section. In view
of above, it is prayed that the Commission may approve the proposed additional
capitalization for control period 2019-24 as proposed.”

223. The Petitioner has not demonstrated the existence of any force majeure

condition for justifying the additional capitalization claimed in respect of this

augmentation of store, which has been carried forward from the 2014-19 tariff period.

It is pertinent to mention that the claim of the Petitioner for additional capitalization of

this asset/ work has not been allowed under ‘force majeure’ in the 2014-19 tariff

period. In view of this, the projected additional capital expenditure of Rs.329.26 lakh

claimed for ‘Augmentation of store’ is not allowed.

Order in Petition No. 408/GT/2020 Page 134 of 178

224. As regards the claim for Coal Pit run-off mechanized drainage system during

2014-19 tariff period, the same has been allowed in paragraph 94 of this order.

225. In view of this decision, the claim of the Petitioner for projected additional

capitalization of Rs.399.63 lakh in 2019-20 is allowed under Regulation 26(1)(c) of

the 2019 Tariff Regulations.

Boundary wall under pass area

226. The Petitioner has claimed projected additional capitalization of Rs.100.00

lakh in 2020-21 towards “Boundary wall under pass area’ under Regulation 26(1)(d)

of the 2019 Tariff Regulations and has stated the following:

“The Intelligence Bureau (IB) conducted a security inspection at plant premises in

November 2018 and submitted a report on the same to MPL. The IB report
recommended that barbed wire fence on both sides of the village road passing
through the middle of plant may be replaced with masonry perimeter wall on both
sides with provision of concertina coil overhang. Also, concertina coil overhang may
be provided all over the perimeter wall. This direction ensures safety of plant from
danger of intrusion. Accordingly, additional capitalization has been proposed and the
same falls within the scope of Regulation 26 (1)(d) of the 2019 Tariff Regulations.
The estimated cost of Rs. 100 lakh for the work is proposed to be incurred in 2020-21
and the Commission may kindly approve the same.”

227. The Petitioner has enclosed the recommendations of IB in support of its claim

for additional capital expenditure towards ‘Boundary wall under pass area’ in 2020-

21. Since the recommendations of IB for higher security and safety of the plant, is

statutory in nature, we allow the projected additional capital expenditure claimed by

the Petitioner for Rs.100.00 lakh for Boundary wall for pass area in 2020-21, under

Regulation 26(1)(d) of the 2019 Tariff Regulations.

Automation of Boom Barrier

228. The Petitioner has claimed projected additional capitalization of Rs.20.00 lakh

in 2020-21 towards ‘Automation of Boom Barrier’ under Regulation 26(1)(d) of the

2019 Tariff Regulations and has submitted the following:

Order in Petition No. 408/GT/2020 Page 135 of 178

 “The automatic boom barrier would offer security at the exit and the entry points of the
plant. Automatic barrier can be used to successfully control pedestrian and vehicle
traffic. It can be used to achieve better security. In order to ensure higher security and
safety of the plant ‘boom barrier’ is required. The cost of the proposal is Rs. 20 lakh to
be incurred in 2020-21 and the Commission may kindly approve the same.”

229. Regulation 26(1)(d) of the 2019 Tariff Regulations provides for capitalization

of additional expenditure (projected or incurred) required for higher security and

safety of the plant as advised or directed by appropriate Indian Government

Instrumentality or statutory authorities responsible for national or internal security.

The Petitioner, in this case, has not established through documentary evidence that

the additional capital expenditure is required to be incurred based on the advice or

direction of any Indian Government Instrumentality or statutory authorities. In the

absence of any justification, the claim of the Petitioner for additional capitalization of

Rs.20.00 lakh in 2020-21 is not allowed.

CCTV Installation

230. The Petitioner has claimed projected additional capitalization of Rs.550.00

lakh (Rs.200.00 lakh in 2020-21 Rs.200.00 lakh in 2021-22 Rs.150.00 lakh in 2022-

23) for installation of CCTV all around the generating station, under Regulation

26(1)(d) of the 2019 Tariff Regulations and has submitted as under:

“The surrounding areas of MPL plant have strongholds of CPI (maoist) cadre. Also,
there is always possibility of damage to the MPL from disgruntled subverted
outsourced workers/employees during strikes/agitation. There are several incidents of
such disturbances in the past. So, in order to ensure safety of plant a proper
monitoring of plant premises is needed. CCTV installation all over the plant may help
averting any unwanted incidents and also activities of people in and around plant can
easily be monitored. Accordingly, additional capitalization has been proposed for an
estimated cost of Rs.550 lakh during the period 2020-23 in a phased manner and the
Commission may kindly approve the same.”

231. The Petitioner has not established through documentary evidence that the

additional capital expenditure is required to be incurred based on the advice or

direction of any Indian Government Instrumentality or statutory authorities. In the

Order in Petition No. 408/GT/2020 Page 136 of 178

absence of any justification, the claim of the Petitioner for additional capitalization of

Rs.550.00 lakh during the period 2020-23 for this asset/ work is not allowed.

Economiser platform for both boilers

232. The Petitioner has claimed projected additional capitalization of Rs.350.00

lakh in 2020-21 towards ‘Economiser platform for both boilers’ under Regulation

26(1)(d) of the 2019 Tariff Regulations and has submitted as under:

“During annual outage most of the maintenance works are undertaken in the
economizer and LTSH region due to maximum erosion of coils. Due to space and
design constraints through inspection, lifting of multiple coils and carrying out repair
activity becomes difficult. Moreover, due to multiple activities being carried out
simultaneously, it becomes unsafe for the workers and employees. In view of above
constraint and safety of the workmen, it is proposed to fabricate permanent structure to
create additional space for the coil removal, inspection, immediate repair and re-
placement of coil in the boiler. Additional space shall enhance safety to the workplace
and thereby avoiding any unwanted eventuality. In addition, it will reduce downtime for
peak, off-peak availability. This expenditure is admissible in terms of Regulations
26(1)(d) of the 2019 Tariff Regulations and the cost of the work for Rs.350 lakh is
proposed to be incurred in 2020-21 and the Commission may kindly approve the
same.”

233. The Petitioner has submitted that the additional capital expenditure is required

for better safety/ security of plant based on the advice or direction of any Indian

Government Instrumentality or statutory authorities. In view of the above, the

projected additional capitalization claimed for Rs.350.00 lakh in 2020-21 for the

asset/ work is allowed. The Petitioner is however directed to furnish at the time of

truing up of tariff, the relevant advice or direction of any Indian Government

Instrumentality or statutory authority to substantiate the said claim.

Mini Fire Tender

234. The Petitioner has claimed projected additional capitalization of Rs.25.00 lakh

in 2020-21 for Mini Fire Tender under Regulation 26(1)(d) of the 2019 Tariff

Regulations. Reason as submitted by the Petitioner is as under:

“The fire fighting system was installed as per IS 3034 and Tariff Advisory Committee
TAC guidelines at MPL. During the forest fire (Both sides of boundary wall of plant) i.e.

Order in Petition No. 408/GT/2020 Page 137 of 178

 grass fire inside and outside of plant, it is very difficult to extinguish with heavy Fire
Tender due to narrow approach. The water intake is about 1.5 km away from the main
plant and the passage / bridge was made for Light Motor Vehicle LMV) only. To cater
to fire in that area an LMV mounted fire tender / Mini fire tender is required. It is
submitted that MPL plant is stretched over a vast area. There are many spots where
large fire tender finds it difficult to reach. Therefore, a mini fire tender is required for
places where large fire tender is unable to reach during emergency. Also, this is
compliance to IS 3034 in respect to safety of the plants and its workers. The estimated
cost of Rs.25 lakh is to be incurred in 2019-20 and the said expenditure fall within the
scope and purview of Regulation 26(1)(d) of the 2019 Tariff Regulations.”

235. The Petitioner has not established through documentary evidence that the

additional capital expenditure is required to be incurred based on the advice or

direction of any Indian Government Instrumentality or statutory authorities. However,

considering the fact that the asset is required for the safe operation of the plant, we

allow the projected additional capital expenditure claimed. The Petitioner is directed

to furnish, at the time of truing up of tariff, the relevant advice or direction of any

Indian Government Instrumentality or statutory authority to substantiate the said

claim.

Road along Boundary wall

236. The Petitioner has claimed projected additional capitalization of Rs.450.00

lakh (Rs.150.00 lakh in 2020-21, Rs.150.00 lakh in 2021-22, Rs.100.00 lakh in 2022-

23 and Rs.50.00 lakh in 2023-24) for ‘Road along Boundary wall’ under Regulation

26(1)(d) of the 2019 Tariff Regulations and has submitted as under:

“The Petitioner has submitted that Intelligence Bureau (IB) conducted security
inspection at plant premises in November 2018. IB submitted its security inspection
report to MPL giving some instructions for ensuring safety and security of the plant. IB
perceived threat from the surrounding areas since it is having stronghold of CPI
(Maoist) cadre. Further, Gate blocking/agitations by the Plant Affected People are very
common features. IB in its report observed that the patrolling track along the perimeter
wall is not metaled. It is away from the perimeter at several points and it is not
continuous. The continuity of motorable patrolling track is essential for reaching of
security personnel and fire tenders at the remotest areas. It recommended laying of
metaled patrolling track all along the perimeter for seamless movement of security
personnel and fire tenders. It is needed for higher security and safety of the plant as
directed by Intelligence Bureau responsible for national or internal security. The copy
of inspection report by IB is already enclosed. The estimated cost of Rs.450 lakh and
is proposed to be incurred during the period 2021-24 covering the periphery road of 18

Order in Petition No. 408/GT/2020 Page 138 of 178

 km. The said expenditure falls within the scope and purview of Regulation 26(1)(d) of
the 2019 Tariff Regulations and hence the same may be allowed.”

237. The Petitioner has enclosed the recommendations of IB in support of its claim

for capitalization of the expenditure towards Road along Boundary wall during the

period 2020-24. Since the recommendations of IB for higher security and safety of

the plant, is statutory in nature, we allow the projected additional capital expenditure

claimed by the Petitioner for Rs.450.00 lakh during 2020-24 for Road along

Boundary wall under Regulation 26(1)(d) of the 2019 Tariff Regulations.

Gate House Near JNT, E-security system, Construction of high-rise safety

platform and walkways

238. The Petitioner has claimed projected additional capitalization of Rs.120.70

lakh in 2019-20 for Gate house near JNT, Rs.248.99 lakh (Rs.148.99 lakh in 2019-

20 and Rs.100.00 lakh in 2020-21) for E-security system and Rs.300.00 lakh in

2019-20 for Construction of high-rise safety platform and walkways under Regulation

26(1)(d) of the 2019 Tariff Regulations and has submitted the following:

“These are the ‘carry forward schemes beyond the original scope of work’. It is
submitted that few schemes that were envisaged for the control period 2014-19 could
not be completed within the control period due to various reasons beyond the control
of the Petitioner. The capitalization towards these schemes got carried forward to
control period 2019-24. The relevant regulations under which the capitalization for
such schemes are Regulation 26(1)(c) read with Regulation 3(25) and Regulation 76
of the 2019 Tariff Regulations. The above mentioned items are claimed under specific
provisions of the 2019 Tariff Regulations and justifications are provided in the truing-up
section. In view of above, it is prayed that the Commission may approve the proposed
additional capitalization for control period 2019-24 as proposed.”

239. The Petitioner has not established through documentary evidence that the

additional capital expenditure is required to be incurred based on the advice or

direction of any Indian Government Instrumentality or statutory authorities. In the

absence of any justification, the claim of the Petitioner for additional capitalization of

Rs.120.70 lakh in 2019-20 for Gate house near JNT, Rs.248.99 lakh (Rs.148.99 lakh

Order in Petition No. 408/GT/2020 Page 139 of 178

in 2019-20 and Rs.100.00 lakh in 2020-21) for E-security system and Rs.300.00 lakh

in 2019-20 for Construction of high-rise safety platform and walkways is not allowed.

De-capitalization

240. The projected de-capitalization claimed by the Petitioner in Form-1(i) is as

under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
1138.34 2927.46 2110.64 1119.45 727.30

241. Based on the above discussion, the projected additional capitalization and de-

capitalization allowed for the purpose of tariff is summarized as under:

(Rs. in lakh)
Sl. Head of work / 2019-20 2020-21 2021-22 2022-23 2023-24
No. Equipment
1 Cost of Land & Site 3881.64 0.00 0.00 0.00 0.00
2 GCW- Boundary wall 160.00 0.00 0.00 0.00 0.00
3 Railway Package 0.00 68506.24 0.00 0.00 0.00
inclusive of IDC
4 Laboratory Instruments 0.00 21.94 57.08 52.90 22.11
5 MAX DCS Version up- 450.00 0.00 0.00 0.00 0.00
gradation (XP) Unit 2
6 Replacement of Battery 0.00 80.00 80.00 90.00 0.00
7 Up-gradation of CHP Main 0.00 60.00 0.00 0.00 0.00
PLC
8 Up-gradation of DMP PLC 0.00 50.00 0.00 0.00 0.00
9 Up-gradation of Raw 0.00 50.00 0.00 0.00 0.00
Water PLC
10 Up-gradation of ABT for 0.00 75.00 0.00 0.00 0.00
RRAS & SCED
11 Implementation of AGC 80.00 0.00 0.00 0.00 0.00
12 Augmentation of Ash 1416.80 500.00 0.00 0.00 0.00
handling
13 Boundary wall under pass 0.00 100.00 0.00 0.00 0.00
area
14 Road along Boundary wall 0.00 150.00 150.00 100.00 50.00
(Periphery road 18 kms)
15 Coal Pit Run-off 399.53 0.00 0.00 0.00 0.00
mechanised Drainage
system
16 ID fan Motor with VFD 0.00 450.00 450.00 450.00 450.00
17 Economiser Platform 0.00 350.00 0.00 0.00 0.00
18 Centrifugal compressor & 0.00 350.00 400.00 0.00 0.00
motor for BTG

Order in Petition No. 408/GT/2020 Page 140 of 178

 Sl. Head of work / 2019-20 2020-21 2021-22 2022-23 2023-24
No. Equipment
19 Centrifugal compressor 0.00 300.00 300.00 300.00 300.00
for Ash Plant
20 Mini Fire Tender 0.00 25.00 0.00 0.00 0.00
Total additional 6387.97 71068.18 1437.08 992.9 822.11
capitalization (A)
Projected de-capitalization 1138.74 2927.46 2110.64 1119.45 727.30
(B)
Net capitalization allowed 5249.63 68140.72 -673.56 -126.55 94.81
(A-B)

Discharge of liabilities

242. The Petitioner has not claimed any discharge of liabilities during the 2019-24

tariff period.

Normative IDC

243. The Petitioner has claimed following amounts of normative IDC on excessive

equity and on actual loan:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Normative IDC on Excess equity 735.90 446.12 337.89 185.90 158.15
Normative IDC on actual loan 79.84 39.84 31.94 0.32 0.10

244. In terms of the discussions and decision in paragraph 105 to paragraph 112

above, the normative IDC allowed for the 2019-24 tariff period are as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24

98.26 1093.21 22.11 15.27 12.65

Capital Cost allowed for the 2019-24 tariff period

245. Based on the opening capital cost and the projected additional capital

expenditure allowed in the preceding paragraphs, the capital cost allowed for the

2019-24 tariff period is as below:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Opening Capital Cost 478969.24 484317.13 553551.06 552899.60 552788.32
Net additional capital 3353.30 66290.72 -1523.46 -526.55 -255.19
expenditure allowed within
original scope of work of the
project

Order in Petition No. 408/GT/2020 Page 141 of 178

Net additional capital 1896.33 1850.00 850.00 400.00 350.00
expenditure allowed beyond
the original scope of work of
the project
Normative IDC allowed 98.26 1093.21 22.11 15.27 12.65
Total net additional capital 5347.89 69233.93 (-) 651.45 (-) 111.28 107.46
expenditure allowed
Capital Cost as on 31st March 484317.13 553551.06 552899.60 552788.32 552895.78
of the year

246. Regulation 18 of the 2019 Tariff Regulations provides as under:

“18. Debt-Equity Ratio: (1) For new projects, the debt-equity ratio of 70:30 as on date
of commercial operation shall be considered. If the equity actually deployed is more
than 30% of the capital cost, equity in excess of 30% shall be treated as normative
loan: Provided that:

i. where equity actually deployed is less than 30% of the capital cost, actual
equity shall be considered for determination of tariff:
ii. the equity invested in foreign currency shall be designated in Indian rupees
on the date of each investment:
iii. any grant obtained for the execution of the project shall not be considered as
a part of capital structure for the purpose of debt: equity ratio.”

247. Gross loan and equity amounting to ₹335278.47 lakh and ₹143690.77 lakh

respectively as on 31.3.2019 as determined vide para 122 and 125 above, has been

considered as the gross loan and equity as on 1.4.2019. Based on the above quoted

Regulation, the debt-equity ratio of 70:30 has been applied on year wise allowed

additional capital expenditure for arriving at the additions to loan and equity during

each year of the tariff period 2019-24. The debt-equity ratio considered for the

purpose of computation of tariff for 2019-24 tariff period is as follows:

(Rs in lakh)
Capital (in %) Additional (%) Capital (%)
cost as on Capitalization cost as
1.4.2019 during 2019-24 on
31.3.2024
Debt 335278.47 70.00 51748.58 70.00 387027.05 70.00
Equity 143690.77 30.00 22177.96 30.00 165868.73 30.00
Total 478969.24 100.00 73926.54 100.00 552895.78 100.00

Return on Equity

248. Regulation 30 of 2019 Tariff Regulations provide as below:

“30. Return on Equity:

Order in Petition No. 408/GT/2020 Page 142 of 178

 (1) Return on equity shall be computed in rupee terms, on the equity base
determined in accordance with Regulation 18 of these regulations.
(2) Return on equity shall be computed at the base rate of 15.50% for thermal
generating station, transmission system including communication system and run-
of-river hydro generating station, and at the base rate of 16.50% for the storage type
hydro generating stations including pumped storage hydro generating stations and
run-of-river generating station with pondage:
Provided that return on equity in respect of additional capitalization after cutoff
date beyond the original scope, excluding additional capitalization on account of
emission control system, shall be computed at the weighted average rate of
interest on actual loan portfolio of the generating station or the transmission
system or in the absence of actual loan portfolio of the generating station or the
transmission system, the weighted average rate of interest of the generating
company or the transmission licensee, as the case may be, as a whole shall be
considered, subject to ceiling of 14%;
Provided further that:
i. In case of a new project, the rate of return on equity shall be reduced by
1.00% for such period as may be decided by the Commission, if the generating
station or transmission system is found to be declared under commercial
operation without commissioning of any of the Restricted Governor Mode
Operation (RGMO) or Free Governor Mode Operation (FGMO), data telemetry,
communication system up to load dispatch centre or protection system based on
the report submitted by the respective RLDC;
ii. in case of existing generating station, as and when any of the 61
requirements under (i) above of this Regulation are found lacking based on the
report submitted by the concerned RLDC, rate of return on equity shall be
reduced by 1.00% for the period for which the deficiency continues;

iii. in case of a thermal generating station, with effect from 1.4.2020:

a) rate of return on equity shall be reduced by 0.25% in case of failure to achieve the
ramp rate of 1% per minute;
b) an additional rate of return on equity of 0.25% shall be allowed for every
incremental ramp rate of 1% per minute achieved over and above the ramp rate of
1% per minute, subject to ceiling of additional rate of return on equity of 1.00%:
Provided that the detailed guidelines in this regard shall be issued by National Load
Dispatch Centre by 30.6.2019.

(3) The return on equity in respect of additional capitalization on account of emission

control system shall be computed at the base rate of one year marginal cost of
lending rate (MCLR) of the State Bank of India as on 1st April of the year in which
the date of operation (ODe) occurs plus 350 basis point, subject to ceiling of 14%.

249. Regulation 31 of the 2019 Tariff Regulations provides as under:

“31. Tax on Return on Equity

1. The base rate of return on equity as allowed by the Commission under
Regulation 30 of these regulations shall be grossed up with the effective tax rate of
the respective financial year. For this purpose, the effective tax rate shall be
considered on the basis of actual tax paid in respect of the financial year in line with
the provisions of the relevant Finance Acts by the concerned generating company or
the transmission licensee, as the case may be. The actual tax paid on income from

Order in Petition No. 408/GT/2020 Page 143 of 178

 other businesses including deferred tax liability (i.e. income from business other
than business of generation or transmission, as the case may be) shall be excluded
for the calculation of effective tax rate.

(2) Rate of return on equity shall be rounded off to three decimal places and shall be
computed as per the formula given below: Rate of pre-tax return on equity = Base
rate / (1-t) Where “t” is the effective tax rate in accordance with clause (1) of this
Regulation and shall be calculated at the beginning of every financial year based on
the estimated profit and tax to be paid estimated in line with the provisions of the
relevant Finance Act applicable for that financial year to the company on pro-rata
basis by excluding the income of non-generation or non-transmission business, as
the case may be, and the corresponding tax thereon. In case of generating
company or transmission licensee paying Minimum Alternate Tax (MAT), “t” shall be
considered as MAT rate including surcharge and cess. Illustration- (i) In case of a
generating company or a transmission licensee paying Minimum Alternate Tax
(MAT) @ 21.55% including surcharge and cess:
Rate of return on equity = 15.50/(1-0.2155) = 19.758% (ii) In case of a generating
company or a transmission licensee paying normal corporate tax including
surcharge and cess:
(a) Estimated Gross Income from generation or transmission business for FY 2019-
20 is Rs 1,000 crore;
(b) Estimated Advance Tax for the year on above is Rs 240 crore;

(c) Effective Tax Rate for the year 2019-20 = Rs 240 crore/Rs 1000 crore = 24%; (d)
Rate of return on equity = 15.50/ (1-0.24) = 20.395%. (3) The generating company
or the transmission licensee, as the case may be, shall true up the grossed up rate
of return on equity at the end of every financial year based on actual tax paid
together with any additional tax demand including interest thereon, duly adjusted for
any refund of tax including interest received from the income tax authorities
pertaining to the tariff period 2019-24 on actual gross income of any financial year.
However, penalty, if any, arising on account of delay in deposit or short deposit of
tax amount shall not be claimed by the generating company or the transmission
licensee, as the case may be. Any under-recovery or over-recovery of grossed up
rate on return on equity after truing up, shall be recovered or refunded to
beneficiaries or the long term customers, as the case may be, on year to year basis.

250. For calculation of ROE in respect of works within the original scope of work

but beyond cut-off date, the Petitioner has grossed up the base rate with MAT rate of

2019-20 (17.472%) for the entire 2019-24 tariff period. The Petitioner has also

grossed up the weighted average rate of interest with the same MAT rate (17.472%)

for calculation of ROE in respect of the additional capitalization beyond the original

scope of work.

251. As regards computation of ROE, Regulation 31 of the 2019 Tariff Regulations,

as quoted above, specifically provides for grossing up of the base rate allowed under

Order in Petition No. 408/GT/2020 Page 144 of 178

Regulation 30 of the 2019 Tariff Regulations. The base rate for return on equity (i.e.

for works within the original scope of the project) for the generating station is 15.50%

as per Regulation 30 of the 2019 Tariff Regulations. The same has been allowed for

grossing up with the MAT rate of 17.472% for all the years of the 2019-24 tariff

period, subject to truing up.

252. Regulation 31 of the 2019 Tariff Regulations provides for grossing up of the

base rate and does not provide for grossing up of weighted average rate of interest

to be used for ROE for additions beyond the original scope of the project.

Accordingly, in line with Regulation 31 of the 2019 Tariff Regulations, ROE has been

allowed as under:

A. Return on Equity allowed at base rate for works within the original scope of
project:
(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Gross Notional Equity 143690.77 144715.59 164921.86 164479.80 164340.90
Addition due to additional 1024.82 20206.27 -442.07 -138.90 -86.77
capitalisation
Closing Equity 144715.59 164921.86 164479.80 164340.90 164254.13
Average Equity 144203.18 154818.73 164700.83 164410.35 164297.51
Return on Equity 15.500% 15.500% 15.500% 15.500% 15.500%
(Base Rate)
Tax rate for the year (MAT 17.472% 17.472% 17.472% 17.472% 17.472%
of 2019-20 applied for the
period)
Rate of Return on Equity 18.782% 18.782% 18.782% 18.782% 18.782%
A: Return on Equity 27083.53 29077.29 30933.29 30878.74 30857.54
allowed at base rate

B. Return on Equity allowed at Weighted Average Rate of Interest (WARI) for

additional capitalisation beyond the original scope of project:
(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Net Opening Equity 0.00 579.55 1143.45 1390.08 1495.60
Add: Increase in equity due to 579.55 563.90 246.63 105.52 119.01
addition during the year / period
Net closing Equity 579.55 1143.45 1390.08 1495.60 1614.61
Average Equity 289.77 861.50 1266.77 1442.84 1555.10
WARI 8.79% 8.79% 8.79% 8.79% 8.79%
B: Return on Equity allowed at 25.47 75.73 111.35 126.83 136.69
WARI

Order in Petition No. 408/GT/2020 Page 145 of 178

253. Thus, the total ROE allowed for the generating station is as under:
(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
A: Return on Equity allowed at 27083.53 29077.29 30933.29 30878.74 30857.54
base rate
B: Return on Equity allowed at 25.47 75.73 111.35 126.83 136.69
WARI
Total Return on Equity 27109.00 29153.01 31044.64 31005.56 30994.24
allowed (A+B)

Interest on Loan

254. Regulation 32 of the 2019 Tariff Regulations provides as under:

“32. Interest on loan capital:

(1) The loans arrived at in the manner indicated in Regulation 18 of these regulations
shall be considered as gross normative loan for calculation of interest on loan.
(2) The normative loan outstanding as on 1.4.2019 shall be worked out by deducting
the cumulative repayment as admitted by the Commission up to 31.3.2019 from the
gross normative loan.

(3) The repayment for each of the year of the tariff period 2019-24 shall be deemed to
be equal to the depreciation allowed for the corresponding year/period. In case of de-
capitalization of assets, the repayment shall be adjusted by taking into account
cumulative repayment on a pro rata basis and the adjustment should not exceed
cumulative depreciation recovered upto the date of de-capitalisation of such asset.

(4) Notwithstanding any moratorium period availed by the generating company or the
transmission licensee, as the case may be, the repayment of loan shall be considered
from the first year of commercial operation of the project and shall be equal to the
depreciation allowed for the year or part of the year.

(5) The rate of interest shall be the weighted average rate of interest calculated on the
basis of the actual loan portfolio after providing appropriate accounting adjustment for
interest capitalized: Provided that if there is no actual loan for a particular year but
normative loan is still outstanding, the last available weighted average rate of interest
shall be considered: Provided further that if the generating station or the transmission
system, as the case may be, does not have actual loan, then the weighted average
rate of interest of the generating company or the transmission licensee as a whole
shall be considered.
(6) The interest on loan shall be calculated on the normative average loan of the year
by applying the weighted average rate of interest.
(7) The changes to the terms and conditions of the loans shall be reflected from the
date of such re-financing.”

255. The salient features for computation of interest on loan are summarized

below:

a) The gross normative loan amounting to Rs.335278.47 lakh has been

considered as on 1.4.2019;

Order in Petition No. 408/GT/2020 Page 146 of 178

 b) Cumulative repayment of loan amounting to Rs.164733.83 lakh as on
31.3.2019 has been considered as on 1.4.2019;

c) The repayment for the year has been considered equal to the depreciation
allowed for that year;

d) Interest on loan has been calculated on the normative average loan of the
year by applying the weighted average rate of interest for 2018-19, which is
subject to truing-up.

256. Interest on loan has been worked out as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Gross Normative Loan 335278.47 339021.99 387485.74 387029.72 386951.83
Cumulative Repayment up 164733.83 188876.16 214160.52 241482.36 269161.00
to Previous Year
Net Loan-Opening 170544.64 150145.83 173325.22 145547.36 117790.83
Addition due to additional 3743.53 48463.75 -456.02 -77.89 75.22
capitalisation
Repayment during the year 24588.73 26492.50 28243.13 28223.66 28223.56
Less: Repayment 446.40 1208.14 921.29 545.02 390.71
adjustment on account of
de-capitalization
Net Repayment 24142.34 25284.36 27321.84 27678.64 27832.85
Net Loan-Closing 150145.83 173325.22 145547.36 117790.83 90033.20
Average Loan 160345.23 161735.52 159436.29 131669.10 103912.02
Weighted Average Rate of 8.790% 8.790% 8.790% 8.790% 8.790%
Interest on Loan
Interest on loan 14094.35 14216.55 14014.45 11573.71 9133.87

Depreciation
257. Regulation 33 of the 2019 Tariff Regulations provides as under:

“33. Depreciation
(1) Depreciation shall be computed from the date of commercial operation of a
generating station or unit thereof or a transmission system or element thereof including
communication system. In case of the tariff of all the units of a generating station or all
elements of a transmission system including communication system for which a single
tariff needs to be determined, the depreciation shall be computed from the effective
date of commercial operation of the generating station or the transmission system
taking into consideration the depreciation of individual units: Provided that effective
date of commercial operation shall be worked out by considering the actual date of
commercial operation and installed capacity of all the units of the generating station or
capital cost of all elements of the transmission system, for which single tariff needs to
be determined.

(2) The value base for the purpose of depreciation shall be the capital cost of the asset
admitted by the Commission. In case of multiple units of a generating station or
multiple elements of a transmission system, weighted average life for the generating
station of the transmission system shall be applied. Depreciation shall be chargeable
from the first year of commercial operation. In case of commercial operation of the
asset for part of the year, depreciation shall be charged on pro rata basis.

Order in Petition No. 408/GT/2020 Page 147 of 178

 (3) The salvage value of the asset shall be considered as 10% and depreciation shall
be allowed up to maximum of 90% of the capital cost of the asset:
Provided that the salvage value for IT equipment and software shall be considered
as NIL and 100% value of the assets shall be considered depreciable;
Provided further that in case of hydro generating stations, the salvage value shall
be as provided in the agreement, if any, signed by the developers with the State
Government for development of the generating station:
Provided also that the capital cost of the assets of the hydro generating station for
the purpose of computation of depreciated value shall correspond to the
percentage of sale of electricity under long-term power purchase agreement at
regulated tariff:
Provided also that any depreciation disallowed on account of lower availability of
the generating station or unit or transmission system as the case may be, shall not
be allowed to be recovered at a later stage during the useful life or the extended
life.

(4) Land other than the land held under lease and the land for reservoir in case of
hydro generating station shall not be a depreciable asset and its cost shall be excluded
from the capital cost while computing depreciable value of the asset.

(5) Depreciation shall be calculated annually based on Straight Line Method and at
rates specified in Appendix-I to these regulations for the assets of the generating
station and transmission system: Provided that the remaining depreciable value as on
31st March of the year closing after a period of 12 years from the effective date of
commercial operation of the station shall be spread over the balance useful life of the
assets.
(6) In case of the existing projects, the balance depreciable value as on 1.4.2019 shall
be worked out by deducting the cumulative depreciation as admitted by the
Commission upto 31.3.2019 from the gross depreciable value of the assets.
(7) The generating company or the transmission licensee, as the case may be, shall
submit the details of proposed capital expenditure five years before the completion of
useful life of the project along with justification and proposed life extension. The
Commission based on prudence check of such submissions shall approve the
depreciation on capital expenditure.
(8) In case of de-capitalization of assets in respect of generating station or unit thereof
or transmission system or element thereof, the cumulative depreciation shall be
adjusted by taking into account the depreciation recovered in tariff by the de-
capitalized asset during its useful services.

258. In line with Regulation 33 of the 2019 Tariff Regulations, the cumulative

depreciation amounting to Rs.164733.83 lakh as on 31.3.2019 has been considered

for the purpose of tariff. Further, the value of freehold land included in the average

capital cost has been adjusted while calculating depreciable value for the purpose of

tariff. Accordingly, depreciation has been calculated as under:

Order in Petition No. 408/GT/2020 Page 148 of 178

 (Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Opening Gross Block (A) 478969.24 484317.13 553551.06 552899.60 552788.32
Addition due to Projected 5347.89 69233.93 (-)651.45 (-)111.28 107.46
additional capitalisation (B)
Closing Gross Block (C) 484317.13 553551.06 552899.60 552788.32 552895.78
Average Gross Block (D) = 481643.18 518934.09 553225.33 552843.96 552842.05
[(A+C)/2]
Value of Freehold land 17513.13 17513.13 17513.13 17513.13 17513.13
included in Gross Block (E)
Depreciable value (F) = [(D- 417717.05 451278.87 482140.98 481797.75 481796.03
E) x 90%]
Remaining depreciable value 252983.22 262402.70 267980.46 240315.39 212635.03
at the beginning of the year
(G) = [F - 164733.83]
Number of completed years 7.58 8.58 9.58 10.58 11.58
at the beginning of the year
(H)
Balance useful life at the 17.42 16.42 15.42 14.42 13.42
beginning of the year (I)
Rate of Depreciation 5.1052% 5.1052% 5.1052% 5.1052% 5.1052%
Depreciation (K) 24588.73 26492.50 28243.13 28223.66 28223.56
Cumulative depreciation at 189322.56 215815.06 244058.19 272281.85 300505.41
the end of the year (before
adjustment for de-
capitalization) (L) = [K +
Cumulative depreciation at
the end of previous year*]
Less: Depreciation 446.40 1208.14 921.29 545.02 390.71
adjustment on account of de-
capitalization (M)
Net Cumulative depreciation 188876.16 214160.52 241482.36 269161.00 296993.84
at the end of the year (N)
* Note: The Cumulative Depreciation at the end of 2018-19 is Rs.164733.83 lakh.

259. The depreciation allowed as above is subject to revision at the time of truing

up of tariff for 2019-24 tariff period.

Unrecovered Depreciation on De-capitalisation

260. The Petitioner has claimed following amounts of unrecovered depreciation for

the respective financial years of 2019-24 tariff period

(Rs. in lakh)
2020 2021 2022 2023 2024 Total
538.14 1297.37 813.33 378.54 207.54 3234.92

261. In line with our discussion and decision on this issue, in paragraph 133 and

paragraph 134 of this order, the prayer of the Petitioner to allow the recovery of

Order in Petition No. 408/GT/2020 Page 149 of 178

unrecovered depreciation (in respect of asset not in use) for the 2019-24 tariff period

is not allowed, as the same is not in conformity with the provisions of the 2019 Tariff

Regulations.

O&M expenses

262. The O&M expenses claimed by the Petitioner for the 2019-24 tariff period are

as below:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Normative O&M Expenses as per 23635.50 24465.00 25326.00 26218.50 27132.00
Regulation 35(1)(i) of the 2019
Tariff Regulations
Water Charges as per Regulation 1930.35 2117.58 2329.34 2562.28 2826.22
35(1)(6) of the 2019 Tariff
Regulations
Security expenses as per 808.07 882.05 956.60 1037.45 1125.15
Regulation 35(1)(6) of the 2019
Tariff Regulations
Capital spares as per Regulation 170.02 55.00 850.00 0.00 0.00
35(1)(6) of the 2019 Tariff
Regulations
Rental and Conveyance 75.65 79.43 83.40 87.57 91.95
Expenses in lieu of 2nd township
O&M expenses for RO Plant 593.40 623.07 880.57 924.60 970.83
Total O&M Expenses 27212.99 28222.13 30425.91 30830.40 32146.15

263. The Respondent KSEBL has contended that claim for additional O&M

expenses in lieu of 2nd township and Ash disposal expenses is not in line with the

2019 Tariff Regulations and, therefore, may be rejected. It has further contended that

there is no provision under the 2019 Tariff Regulations to claim additional O&M

expenses to run the Reverse Osmosis plant and the same may also be disallowed.

264. Regulation 35(1)(i) of the 2019 Tariff Regulations provide the following

Normative O&M expense norms for 500 MW series for coal based generating

stations:

(Rs. lakh/MW)
2019-20 2020-21 2021-22 2022-23 2023-24
22.51 23.30 24.12 24.97 25.84

Order in Petition No. 408/GT/2020 Page 150 of 178

 265. In terms of Regulation 35(1)(i) of the 2019 Tariff Regulations, the Petitioner

has claimed the following Normative O&M expenses for the 2019-24 tariff period:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
23635.50 24465.00 25326.00 26218.50 27132.00

266. The Normative O&M expenses claimed by the Petitioner is in accordance with

Regulation 35(1)(i) of the 2019 Tariff Regulations and hence allowed.

Water Charges

267. Regulation 35(6) of the 2019 Tariff Regulations provide as under:

“(6) The Water Charges, Security Expenses and Capital Spares for thermal
generating stations shall be allowed separately after prudence check:
Provided that water charges shall be allowed based on water consumption
depending upon type of plant and type of cooling water system, subject to prudence
check. The details regarding the same shall be furnished along with the petition;
xxxxx

268. The Petitioner has claimed Water charges (on projected basis) in terms of

Regulation 35(6) of the 2019 Tariff Regulations as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
1930.35 2117.58 2329.34 2562.28 2826.22

269. In support of the projected water charges claimed, the Petitioner has

furnished the following computations:

2019-20 2020-21 2021-22 2022-23 2023-24

Gross generation MU 7839.72 7818.30 7818.30 7818.30 7839.72
Specific Raw water m3/MWh 2.31 2.31 2.31 2.31 2.31
Consumption for FY
2018-19
Total Raw m3 18142383 18092814 18092814 18092814 18142383
Consumption
Rate of Raw water Rs./m3 10.64 11.70 12.87 14.16 15.58
charges
Total Raw water Rs. in lakh 1930.35 2117.58 2329.34 2562.28 2826.22
Expenses

Order in Petition No. 408/GT/2020 Page 151 of 178

270. The Petitioner has submitted that the Water charges are based on the gross

generation during the year and the estimated Specific Raw water consumption per

unit. It has submitted that Specific Raw water consumption in 2018-19 is 2.31 m3 per

Megawatt hour (MWh) which is below the Ministry of Environment & Forest

guidelines and the same has been projected during the 2019-24 tariff period. The

Petitioner has submitted that DVC vide its Office Memorandum dated 23.7.2019 had

revised the Water tariff for Industrial consumers (drawing water from reservoir/ river)

including the Petitioner from Rs.5.7/kl to Rs.10.64/kl, with an annual escalation of

10% effective from 1.4.2019. Considering the revised tariff including the annual

escalation and Water consumption at Specific Raw water consumption of 2.31

m3/MWh, the Petitioner has prayed that the Commission may approve the projected

Raw Water charges for the 2019-24 tariff period as claimed. The Petitioner has also

furnished the copy of the DVC OM dated 23.7.2019 along with the communication

made by the Petitioner with DVC.

271. Considering the fact that Water charges projected by the Petitioner for the

2019-24 tariff period is based on actual consumption of water during the year 2018-

19 and the tariff rates specified by DVC for water, we allow the projected water

charges claimed by the Petitioner for the 2019-24 tariff period. However, the

projected water charges allowed are subject to truing-up, based on prudence check

of the actual water charges paid.

Security Expenses
272. The first proviso to Regulation 35(6) of the 2019 Tariff Regulations provide as

under:

“Provided further that the generating station shall submit the assessment of the security
requirement and estimated expenses;

Order in Petition No. 408/GT/2020 Page 152 of 178

273. The actual Security expenses incurred by the Petitioner for the 2014-19 tariff

period is as under:

(Rs. in crore)
2014-15 2015-16 2016-17 2017-18 2018-19
Plant Security 5.51 6.44 6.46 6.44 6.96
Other Security related - AMC 0.00 0.02 0.12 0.15 0.35
Total Security Expenses 5.51 6.46 6.59 6.59 7.32

274. The Security Expenses projected by the Petitioner for the 2019-24 tariff period

is as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Plant Security 754.88 818.39 887.23 961.86 1042.78
Other Security related AMC 38.40 41.64 45.14 48.93 53.05
Total Security Expenses 793.29 860.02 932.37 1010.80 1095.83

275. In addition to the above, the Petitioner has claimed projected additional

security expenses for the following:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Issuance of smart card 5.00 5.50 6.05 6.66 7.32
Purchase of Security gadgets 8.00 8.80 9.68 10.65 11.71
AMC for Turnstile 1.58 6.93 7.62 8.39 9.22
AMC for Boom Barrier 0.20 0.80 0.88 0.97 1.06
Total 14.78 22.03 24.23 26.66 29.32

276. Accordingly, the total Security Expenses (on projection basis) claimed by the

Petitioner in terms of Regulation 35(1)(6) of the 2019 Tariff Regulations is as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Security Expenses 793.29 860.02 932.37 1010.80 1095.83
Additional Security Expenses 14.78 22.03 24.23 26.66 29.32
Total Security expenses 808.07 882.05 956.60 1037.45 1125.15

277. Considering the fact that the additional capitalization towards the Construction

of Boom Barrier has not been allowed in this order, the expenditure for AMC of the

said asset is not allowed as part of the security expenses. Accordingly, the projected

Security expenses allowed for the 2019-24 tariff period are as under.

Order in Petition No. 408/GT/2020 Page 153 of 178

 (Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Security expenses claimed as per 808.07 882.05 956.6 1037.45 1125.15
Regulation35(1)(6) of the 2019 Tariff
Regulations
Less Security expenses not allowed 0.20 0.80 0.88 0.97 1.06
(for boom barrier)
Security Expenses allowed 807.87 881.25 955.72 1036.48 1124.09

Capital spares

278. The last proviso to Regulation 35(6) of the 2019 Tariff Regulations provide as

under:

“Provided also that the generating station shall submit the details of year-wise actual
capital spares consumed at the time of truing up with appropriate justification for
incurring the same and substantiating that the same is not funded through
compensatory allowance as per Regulation 17 of Central Electricity Regulatory
Commission (Terms and Conditions of Tariff) Regulations, 2014 or Special Allowance
or claimed as a part of additional capitalisation or consumption of stores and spares
and renovation and modernization.”

279. The Capital spares claimed by the Petitioner in terms of Regulation 35(6) of

the 2019 Tariff Regulations are as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
170.00 55.00 850.00 0.00 0.00

280. The Petitioner has submitted that it requires several capital spares for critical

equipment during the 2019-24 tariff period in order to ensure the reliability and

availability of the main equipment. It has further submitted that these capital spares

have not been included in the additional capitalization claims projected by the

Petitioner above. Accordingly, the Petitioner has submitted that the Commission may

approve the expenditure on capital spares as under:

(Rs. in lakh)
Item/Activity 2019-20 2020-21 2021-22 2022-23 2023-24
Coal Mill Gearbox 0.00 0.00 400.00 0.00 0.00
Crusher Rotor Assembly 0.00 0.00 150.00 0.00 0.00
(Capital Spare -Imported)
Procurement of 400 kV Breaker 0.00 55.00 0.00 0.00 0.00
TDBFP Recirculation valve 170.00 0.00 0.00 0.00 0.00
TG Bearing Set 0.00 0.00 300.00 0.00 0.00
Total Capital Spares 170.00 55.00 850.00 0.00 0.00

Order in Petition No. 408/GT/2020 Page 154 of 178

281. It is evident from the last proviso to Regulation 35(6) of the 2019 Tariff

Regulations that the Petitioner is required to furnish proper details and justification,

the actually consumed capital spares, at the time of truing up of tariff. Therefore, the

Petitioner is granted liberty to approach the Commission with details of capital

spares consumed, at the time of truing-up of tariff in terms of the last proviso to the

said regulation and the same will be considered in accordance with law.

Rental and Conveyance expenses in lieu of 2nd Township

282. In addition to the normative O&M expenses, the Petitioner has claimed Rental

and Conveyance expenses in lieu of 2nd township, as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
75.65 79.43 83.40 87.57 91.95

283. The Petitioner has considered the incremental rate of 5% per annum on the

average of the total expenditure incurred during the 2014-19 tariff period, to claim the

projected Rental and Conveyance expenses in lieu of 2nd township, as under:

(Rs.in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
Lease Rental (a) 86.15 90.45 94.98 99.73 04.71
Rent deduction from 73.30 76.96 80.81 84..85 89.09
employees (b)
Transportation cost (c) 62.80 65.94 69.23 72.69 76.33
Total (a-b+c) 75.65 79.43 83.40 87.57 91.95

284. The reasons furnished by the Petitioner in support of the claim are the same

as those furnished by the Petitioner for the 2014-19 tariff period as extracted in

paragraph 145 and paragraph 146 of this order. The Commission, after considering

the submissions of the Petitioner had rejected the claim of the Petitioner under this

head in paragraph 149 of this order. In line with the said decision, the additional

O&M expenses for Rental and Conveyance Expenses in lieu of 2nd township for the

2019-24 tariff period is for 2019-24 tariff period is not allowed.

Order in Petition No. 408/GT/2020 Page 155 of 178

O&M Expenses for RO Plant

285. The Petitioner has also claimed additional O&M Expenses towards Reverse

Osmosis Plant for the 2019-24 tariff period as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
593.40 623.07 880.57 924.60 970.83

286. The Petitioner has submitted that in order to comply with the statutory

directions, it has to run the Reverse Osmosis (RO) Plant. It has also submitted that

with the commissioning of the RO Plant, the Petitioner is required to incur substantial

expenditure towards O&M expenses of the RO Plant on a daily basis. While pointing

out that O&M expenses mainly consist of cost towards consumables and service

cost, the Petitioner has submitted that the consumable cost mainly consists of cost

towards chemical consumption on daily basis, cost towards routine maintenance

spares and replacement of cartridge, membrane, media etc. Accordingly, the

Petitioner, as per preliminary estimates and considering the chemical cost, the rate

of replacement of membranes and consumption of regular maintenance spares and

an annual escalation of 5%, has projected the cost of consumables during the 2019-

24 tariff period as below:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Chemical consumables 442.44 464.56 487.79 512.18 537.79
Replacement of Cartridge &
90.36 94.88 99.62 104.60 109.83
Membrane
Resin and Media top up 9.6 10.08 10.58 11.11 11.67
Maintenance Spares 51.00 53.55 56.23 59.04 61.99
Total Consumables 593.40 623.07 654.22 686.93 721.28
O&M Services 0.00 0.00 226.34 237.66 249.54
Total O&M Expenses 593.40 623.07 880.57 924.60 970.83

287. The O&M expense norms for the thermal generating station covers the O&M

of power plants in general, including equipment’s such as ETP, STP etc., which also

uses the consumables/chemicals and for other plants not having RO system, which

Order in Petition No. 408/GT/2020 Page 156 of 178

 may be treating water with other alternative technologies. Regulation 35(6) of the

2019 Tariff Regulations provide for the grant of O&M expenses towards Water

charges, Security Expenses and Capital spares, separately. As the provisions of

2019 Tariff Regulations do not provide for the grant of additional O&M expenses

toward RO System of plant, the claim of the Petitioner is not permissible.

288. Based on the above discussion, the O&M expenses allowed for the 2019-24

tariff period is summarized as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Normative O&M expenses as 23635.50 24465.00 25326.00 26218.50 27132.00
per Regulation 35(1)(i) of the
2019 Tariff Regulations
Water Charges as per 1930.35 2117.58 2329.34 2562.28 2826.22
Regulation 35(1)(6) of the 2019
Tariff Regulations
Security expenses as per first 807.87 881.25 955.72 1036.48 1124.09
proviso to Regulation 35(1)(6)
of the 2019 Tariff Regulations
Capital spares as per last 0.00 0.00 0.00 0.00 0.00
proviso to Regulation 35(1)(6)
of the 2019 Tariff Regulations
Total O&M Expenses allowed 26373.72 27463.83 28611.06 29817.26 31082.31
Total O&M Expenses claimed 27212.99 28222.13 30425.91 30830.40 32146.15

Ash Disposal Expenses

289. The Commission in its order dated 25.4.2019 in Review Petition No

16/RP/2018 (in Petition No. 152/GT/2015) had allowed the projected ‘Ash disposal’

expenses for the 2014-19 tariff period based on the following observations:

“42. In the present case, the Petitioner is only claiming the cost incurred by it pertaining
to the activity of ash disposal during the period 2014-18 periods on the same basis as
was approved during 2011-14. The Additional O&M expenses for Ash Disposal claimed
by the Petitioner in the impugned Order is basically due to limited ash pond capacity,
which require mandatory disposal of ash from the pond, as per the statute prescribed
by MoEF and not of the nature of expenses claimed by NTPC, in Petition No.
172/MP/2016. Hence, there is an error apparent on the face of the record and the
expenditure of ₹260.90 lakh claimed by the Petitioner for Ash disposal during 2014-18
is allowed. However, the same will be trued up at the end of tariff period with prudence
check and the Petitioner is directed to submit the relevant documents in support of the
said expenditure.”

Order in Petition No. 408/GT/2020 Page 157 of 178

 290. Accordingly, we have, in paragraph 153 of this order, allowed the audited

actual ‘Ash disposal’ expenses for the 2014-19 tariff period as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19 Total
6098.44 3791.36 3647.73 3320.87 3340.46 20198.86

291. The Petitioner has claimed Ash disposal expenses (on projection basis) for

the 2019-24 tariff period as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
3425.52 3416.16 3416.16 3416.16 3425.52

292. The Petitioner has submitted that on account of dropping of Ash conveying

pipeline, due to uncertainty in the allocation of the abandoned mines for ash disposal

by ECL management, the ash disposal expenses may be allowed. It is observed that

the coal received at Maithon site is of sub-optimal quality as compared to the design

coal and ash content is to the tune of 43% to 46% (approx.). However, due to limited

capacity of the Ash ponds, the Petitioner has considered the option of disposing

unutilized ash through bulkers to sites for back filling of mines and to other approved

locations for land filling, thereby incurring the cost towards excavation and

transportation of pond ash. The projected ash disposal expenses claimed by the

Petitioner are as follows.

Period Consumption Ash Fly Ash Fly Ash Bottom Pond Ash
Plan Generation (gainful (stowing Ash Ash Disposal
(As Per 85% PLF) (MT) utilisation) of (MT) (MT) cost
(MT) (MT) mines) (Rs. in lakh)
(MT)
2019-20 4598744 1868010 373602 1338016 311335 159404 3425.6
2020-21 4586180 1862906 372581 1334361 310484 158968 3416.2
2021-22 4586180 1862906 372581 1334361 310484 158968 3416.2
2022-23 4586180 1862906 372581 1334361 310484 158968 3416.2
2023-24 4598744 1868010 373602 1338016 311335 159404 3425.6

Order in Petition No. 408/GT/2020 Page 158 of 178

293. The Respondent KSEBL has contended that claim for additional O&M

expenses for Ash disposal expenses is not in line with the 2019 Tariff Regulations

and, therefore, may be rejected.

294. The matter has been considered. We observe that the Ash disposal expenses

claimed by the Petitioner and allowed to this generating station since COD, is in view

of limited capacity of the Ash ponds and the mandatory ash disposal in terms of the

notification of MOEF&CC mandating 100% ash utilization. Considering the limited

capacity of ash ponds and the fact that the Petitioner is under an obligation of

meeting 100% ash utilization as per MOEF & CC notification, we, in line with our

dated 25.4.2019 in Review Petition No.16/RP/2018 (in Petition No.152/GT/2015) (as

quoted in paragraph 289 above), allow the expenses claimed towards Ash disposal,

on projection basis, for the 2019-24 tariff period as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
3425.52 3416.16 3416.16 3416.16 3425.52

295. This is however subject to prudence check at the time of truing-up of tariff of

the generating station. The Petitioner is directed to award Ash disposal contracts

based on the transparent bidding process and shall submit the details of bidding

while claiming the actual ash disposal expenses during truing up of tariff for the

2019-24 tariff period. Considering the fact that the reimbursement of ash disposal

expenses is allowed based on the special circumstances (limited ash pond storage)

for this generating station, these expenses are not made part of the O&M expenses

allowed and the consequent annual fixed charges determined in this order.

296. Accordingly, the total O&M expenses allowed to the generating station for the

2019-24 tariff period is summarised as under:

Order in Petition No. 408/GT/2020 Page 159 of 178

 (Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Normative O&M expenses as 23635.50 24465.00 25326.00 26218.50 27132.00
per Regulation 35(1)(i) of the
2019 Tariff Regulations
Water Charges as per 1930.35 2117.58 2329.34 2562.28 2826.22
Regulation 35(1)(6) of the
2019 Tariff Regulations
security expenses as per 807.87 881.25 955.72 1036.48 1124.09
Regulation 35(1)(6) of the
2019 Tariff Regulations
Capital spares as per 0.00 0.00 0.00 0.00 0.00
Regulation 35(1)(6) of the
2019 Tariff Regulations
Total O&M Expenses 26373.72 27463.83 28611.06 29817.26 31082.31
allowed as per Regulations
Total O&M Expenses claimed 27212.99 28222.13 30425.91 30830.4 32146.15
(excluding Ash expenses
claimed)

Operational Norms

297. The operational norms considered by the Petitioner in Form-3 of the petition,

is as under:

Normative Annual Plant Availability Factor (%) 85

Station Heat Rate (kcal/kWh) 2388
Auxiliary Power Consumption (%) 6.25
Specific Oil Consumption (ml/kWh) 0.50

Normative Annual Plant Availability Factor (NAPAF)

298. In terms of Regulation 49(A)(a) of the 2019 Tariff Regulations, the NAPAF of

the thermal generating station is 85%. Hence, the NAPAF of 85% as considered by

the Petitioner is in order and the same has been considered for the purpose of tariff.

Station Heat Rate

299. Regulation 49(C)(b)(i) of the 2019 Tariff Regulations provides for Station Heat

Rate as under:

“(b) Gross Station Heat Rate

(b) Thermal Generating Station achieving COD on or after 1.4.2009.
(i) Coal-based and lignite-fired Thermal Generating Stations
= 1.05 X Design Heat Rate (kCal/kWh)

Order in Petition No. 408/GT/2020 Page 160 of 178

 Where the Design Heat Rate of a generating unit means the unit heat rate
guaranteed by the supplier at conditions of 100% MCR, zero percent make up,
design coal and design cooling water temperature/back pressure.
Provided that the design heat rate shall not exceed the following maximum design
unit heat rates depending upon the pressure and temperature ratings of the units:

Pressure Rating (Kg/cm2) 150 170 170

SHT/RHT (0C) 535/535 537/537 537/565
Type of BFP Electrical Turbine Turbine
Driven Driven Driven
Max Turbine Heat Rate (kCal/kWh) 1955 1950 1935
Min. Boiler Efficiency
Sub-Bituminous Indian Coal 0.86 0.86 0.86
Bituminous Imported Coal 0.89 0.89 0.89
Sub-Bituminous Indian Coal 2273 2267 2250
Bituminous Imported Coal 2197 2191 2174

Provided further that in case pressure and temperature parameters of a unit are
different from above ratings, the maximum design unit heat rate of the nearest class
shall be taken:
Provided also that where unit heat rate has not been guaranteed but turbine cycle
heat rate and boiler efficiency are guaranteed separately by the same supplier or
different suppliers, the unit design heat rate shall be arrived at by using guaranteed
turbine cycle heat rate and boiler efficiency:
Provided also that where the boiler efficiency is below 86% for Sub-bituminous Indian
coal and 89% for bituminous imported coal, the same shall be considered as 86%
and 89% respectively for Sub-bituminous Indian coal and bituminous imported coal
for computation of station heat rate:

Provided also that maximum turbine cycle heat rate shall be adjusted for type of dry
cooling system:
Provided also that if one or more generating units were declared under commercial
operation prior to 1.4.2019, the heat rate norms for those generating units as well as
generating units declared under commercial operation on or after 1.4.2019 shall be
lowest of the heat rate norms considered by the Commission during tariff period
2014-19 or those arrived at by above methodology or the norms as per the sub-
clause (C)(a)(i) of this Regulation:):”

300. The Petitioner in Form-2 of the petition has furnished the Boiler Efficiency as

87.80% and the Turbine Heat Rate as 1945 kCal/kWh. Considering the operating

margin of 5% as specified in Regulation 49(C)(b)(i), the Gross Station Heat Rate of

the generating station works out as 2326.03 kCal/kWh (1945x1.05)/0.878). Against

this, the Petitioner in Form-3 of the petition has considered the SHR of 2388

kCal/kWh for the 2019-24 tariff period, seeking relaxation in the Station Heat Rate on

the following grounds:

Order in Petition No. 408/GT/2020 Page 161 of 178

 (a) The Commission in its order dated 26.12.2017 in Petition No.152/GT/2015, had
approved the Station Heat Rate of 2375 kCal/kWh for the 2014-19 tariff period at
level of Gross Station Heat Rate of the existing thermal generating station i.e. 2375
kCal/kWh in terms of the 2014 Tariff Regulations. The Gross Station Heat Rate of the
Petitioner’s station was 2377 kCal/kWh (1.045x1945/0.855) considering the boiler
efficiency of 85.5% and Turbine Heat Rate of 1945kCal/kWh in terms of Regulation
36 (C) (c) of the 2014 Tariff Regulations. Considering the submissions of the
Petitioner and noting the poor quality of coal received at the plant, the Commission
had approved the boiler efficiency of 85.5% obtained during the PG test with actual
coal compared to 87.80% as guaranteed by OEM (M/s BHEL) using design coal. The
relevant para of the order dated 26.12.2017 is extracted below:

“152. We have examined the matter. The issue of deviation in the design boiler efficiency
and the actual boiler efficiency was raised by the Petitioner in Petition No. 274/2010 and the
Commission after considering the submissions of Petitioner and the actual values of the PG
test vide had relaxed the norms of the station heat rate vide order dated 19.11.2014……
Xxxxx

153. The Commission in 2009-14 tariff allowed the GSHR of 2425 kCal/kWh with a rider that
up to 2360.47 kCal/kWh should be passed on to the beneficiaries in full and the benefit of
heat rate achieved below 2360.47 kCal/ kWh, may be retained by the Petitioner. The
Petitioner has submitted that Boiler Efficiency is 85.5% by using actual coal received by the
Petitioner as the quality of coal received remains the same. By considering the boiler
efficiency of 85.5% and Turbine cycle heat rate of 1945 Kcal/kWh, the Gross Station Heat
Rate of the generating station works out as 2377 kCal/kWh (1.045x1945/0.855) for the
period 2014-19. However, the Petitioner has considered the Gross Station Heat Rate of
2375 kCal/kWh. The GSHR claimed by the Petitioner during 2014-19 is less than the GSHR
allowed during 2009-14 period. In view of this, the Gross Station Heat Rate of 2375 Kcal/
kWh for the period 2014-19 has been allowed.” (emphasis supplied)

301. The Petitioner has submitted that due to availability of sub-optimal quality of

coal in the region, the quality of the actual coal received at the plant has not

improved and, therefore, the condition remains the same till date. Accordingly, the

Petitioner has prayed that the Commission may approve the boiler efficiency at

85.5% as obtained during the PG test with the actual coal for the 2019-24 tariff

period, in exercise of the power vested under Regulation 3(25) read with Regulation

54 of the 2019 Tariff Regulations. According to the Petitioner, by considering the

Boiler Efficiency of 85.5% as the quality of coal received remain suboptimal and with

the Turbine Heat Rate of 1945 kCal/kWh, the Gross Station Heat Rate works out as

2388 kCal/kWh (1.05x1945/0.855) for the 2019-24Tariff Period.

302. The Commission vide ROP of the hearing dated 2.6.2020 had directed the

Petitioner to furnish the actual coal quality (GCV, proximate and ultimate analysis)

Order in Petition No. 408/GT/2020 Page 162 of 178

received in generating station during the year 2019-20 and the coal quality of worst

coal, design coal and best coal envisaged by the OEM for guaranteed parameter of

boiler efficiency. In response, the Petitioner vide affidavit dated 20.6.2020 has

furnished the details and submitted as under:

a) Since the current coal quality has not improved vis-à-vis the coal quality that
was there at the time of PG test, the Petitioner has proposed to consider the
Boiler efficiency as 85.5% in the 2019-24 tariff period as well.

b) The proximate and ultimate analysis data submitted by the Petitioner for the
entire period of 2019-20 is not a correct representative of the coal that will be
fired in the balance period of the control period. The same is on account of the
fact that imported coal of high quality (which was initiated during H2 of 2018-
19 due to coal scarcity at that time) was used along with domestic coal for first
5 months. Approximately 1.98 lakh MT of Imported coal was received in H2 of
2018-19 with opening stock of ~32000 MT in April 2020 and ~28000 MT
received in Q1 of 2019-20.

c) Since coal supplies from domestic sources have improved after the said
period, albeit the quality has not improved. It is most likely that only domestic
coal shall be fired in the balance control period as well. Further, the coal
quality is likely to be the same as in the latest 9 months when only domestic
coal was fired. Accordingly, for the purposes of comparing the coal quality
during PG test and the present/future coal quality of domestic coal, the
Petitioner proposes to discard the data for first two months of 2019-20 and
consider the coal characteristics for the last 9 months i.e. September 2019 to
May 2020.

d) With respect to coal quality during the PG test, the ash content has reduced
slightly by 2.11% from 42.98% to 40.87% (against design of 36.19%), which
has resulted in small increase in GCV by 109 kCal/kg, which should
theoretically improve the boiler efficiency. Simultaneously, the moisture
content in the coal has also increased by 0.59%, which causes some more
heat loss due to evaporation and hence causes decrease in efficiency. The
correction to be applied for variation in GCV and moisture may be done by
linear approximation of the correction curves for GCV and moisture variation
supplied by the OEM. A copy of the correction curves for GCV and Moisture is
annexed herewith.
e) The GCV correction curve shows that for an improvement of GCV of 240
kCal/kg (from 4431 to 4671), the efficiency improves by 0.28%. Similarly, for
an increase in moisture by 0.4% (from 7.11 to 7.61), the efficiency drops by
0.05%. Applying these corrections to the PG test result of 85.5%, the
theoretical net improvement in efficiency comes to only 0.049%
(109x0.28/240 – 0.59x0.05/0.5) i.e. 85.5% improves to 85.55% only. Thus, the
current coal quality should theoretically yield approximately the same
efficiency as was measured during PG test i.e. 85.5%.

Order in Petition No. 408/GT/2020 Page 163 of 178

303. The Respondent KSEBL has objected to the prayer of the Petitioner and has

submitted that the claim of the Petitioner may not be allowed.

304. The matter has been considered. The Commission in its orders relating to the

2009-14 and 2014-19 tariff periods had considered the Boiler Efficiency as 85.5%

against the Design Efficiency of 87.8% for the generating station, in relaxation of the

Tariff Regulations, based on the lower boiler efficiency achieved during PG test due

to poor quality of coal having more ash content and more moisture. The details of the

coal quality (domestic coal) furnished by the Petitioner, in response to the ROP

dated 2.6.2020, indicate that there is slight improvement in the GCV of coal and also

some increase in moisture is observed, as compared to the coal burnt at the time of

PG test. It is also observed that the variation in quality of coal from PG test quality to

the quality of coal received during the year 2019-20 has improved the efficiency by

0.05% only. The COD of the generating station is 24.7.2012. The Petitioner was

granted relaxation in Boiler Efficiency due to poor quality of coal received during the

previous tariff periods, as stated above. The question for consideration is ‘whether

the relaxation granted to the Petitioner during the previous tariff periods is required to

be continued on a perpetual basis, during the entire contract period.

305. The Petitioner has considered PG Test performance based on the quality of

coal permissible to the Boiler and Plant characteristics. Also, the PPA was executed

by the Petitioner based on demonstrable plant characteristics. The Boiler efficiency

had undergone changes due to receipt of poor quality of coal in comparison to the

quality envisaged at the time of PG test. The deterioration of coal quality is

temporary and cannot alter the plant characteristics on a perpetual basis. Coal is

being procured by the Petitioner after execution of the Fuel Supply Agreement with

the coal supplier. It was the obligation of the Petitioner, while entering into FSA, to

Order in Petition No. 408/GT/2020 Page 164 of 178

ensure the desired quality of coal, by enforcing the provisions of FSA or by exploring

any other alternate sources of coal. The Petitioner, having not been prevented from

exploring alternate source of coal, cannot, on a perpetual basis, be permitted to pass

on the burden on the beneficiaries on this count, more so when the Petitioner has

not fulfilled the said obligations. It is further noticed that the Petitioner has not

furnished any documentary evidence substantiating the efforts taken by it to ensure

the good quality of coal. In our view, the relaxation of SHR of the generating station,

in perpetuity, based on coal quality, will render the operational parameters specified

under the 2019-24 Tariff Regulations for all generators redundant, as more often

than not, the coal quality may no match with design coal. In view of this, there is no

merit in the prayer of the Petitioner for relaxation of SHR on grounds of deterioration

in quality of coal. The Petitioner is directed to ensure the required quality of coal as

envisaged during the PG test. Accordingly, considering the operating margin of 5%

as specified in Regulation 49(C)(b)(i) of the 2019 Tariff Regulations, the GSHR of the

generating station works out as 2326.03 kcal/kWh [1945*1.05)/0.878] and the same

is considered and allowed.

306. Regulation 49(E)(a)(ii) of the 2019 Tariff Regulations provides for Auxiliary

power Consumption (APC) as under:

“(E) Auxiliary Energy Consumption

(a) Coal-based generating stations except at (b) below:
With Natural Draft cooling tower or
without cooling tower
(i) 200 MW series 8.5%
(ii) 300 MW and above
Steam driven boiler feed pumps 5.75%
Electrically driven boiler feed pumps 8.0%
Provided that for thermal generating stations with induced draft cooling towers and
where tube type coal mill is used, the norms shall be further increased by 0.5% and
0.8% respectively:…”

Order in Petition No. 408/GT/2020 Page 165 of 178

307. Both the units of the generating station of the Petitioner, with capacity of 300

MW and above have Steam-driven Boiler Feed Pumps & Induced Draft Cooling

Tower. Therefore, both the units qualify for a normative APC of 6.25% (5.75% for

Units having Steam-driven BFP and additional 0.50% for having Induced Draft

Cooling Tower). In view of the above, the normative APC of 6.25% as considered by

the Petitioner is in order and therefore allowed.

Specific Oil Consumption

308. Regulation 49(D)(a) of the 2019 Tariff Regulations provides for the Secondary

fuel oil consumption of 0.50 ml/kWh for Coal based generating stations. Hence, the

Secondary fuel oil consumption considered by the Petitioner in terms of the said

regulation is allowed.

Interest on Working Capital

309. Sub-section (a) of clause (1) of Regulation 34 of the 2019 Tariff Regulations

provides as under:

“34 (1) the working capital shall cover:

(a) Coal-based/lignite-fired thermal generating stations
(i) Cost of coal or lignite and limestone towards stock, if applicable, for 10 days for
pit-head generating stations and 20 days for non-pit-head generating stations for
generation corresponding to the normative annual plant availability factor or the
maximum coal/lignite stock storage capacity whichever is lower;
(ii) Cost of coal or lignite and limestone for 30 days for generation corresponding to
the normative annual plant availability factor;
(iii) Cost of secondary fuel oil for two months for generation corresponding to the
normative annual plant availability factor, and in case of use of more than one
secondary fuel oil, cost of fuel oil stock for the main secondary fuel oil;
(iv) Maintenance spares @ 20% of operation and maintenance expenses including
water charges and security expenses;
(v) Receivables equivalent to 45 days of capacity charges and energy charges for
sale of electricity calculated on the normative annual plant availability factor; and

(v) Operation and maintenance expenses, including water charges and security
expenses for one month.”

Order in Petition No. 408/GT/2020 Page 166 of 178

 Fuel Cost and Energy Charges in Working Capital

310. The Petitioner has claimed the cost for fuel component in working capital

based on price and on ‘as received’ GCV of coal procured and burnt for the months

of October 2018, November 2018, and December 2018 and Secondary fuel oil for

months of October 2018, November 2018, and December 2018 as under:

(Rs. in lakh)
Year 2019-20 2020-21 2021-22 2022-23 2023-24
Cost of coal for 50 days 28573.30 28573.30 28573.30 28573.30 28573.30
Cost of Secondary fuel oil 2 279.86 279.09 279.09 279.09 279.86
months

311. The computation of Energy Charges and Fuel component (coal cost) in

working capital during the 2019-24 tariff period is based on “as received GCV” of

coal. The Petitioner has claimed Energy Charge Rate (ECR) of 281.01 paise/kWh,

based on the Weighted Average Price, GCV of coal (on ‘as received’ basis) and Oil

procured and burnt for the three months (October, 2018 to December, 2018). The

cost for fuel components in working capital has been computed deducting the 85

kCal per Kg from the Weighted Average Gross Calorific Value of coal ‘as received’

on account of the variation during storage, as specified under Regulation 43(2) (b) of

the 2019 Tariff Regulations and considering the GCV and cost of coal procured and

GCV and cost of Secondary fuel oil procured for the three months (October, 2018 to

December, 2018) as given below:

(Rs. in lakh)
Year 2019-20 & 2023-24 2020-21 to 2022-23
Working Capital towards Cost of Coal for stock 11266.15 11266.15
(20 days of generation at NAPAF)
Working Capital towards Cost of Coal for 16899.22 16899.22
Generation (30 days of generation at NAPAF)
Coal cost for 50 days of generation at NAPAF 28165.37 28165.37
Cost of Secondary fuel oil 315.50 314.64
(2 months of generation at NAPAF)

Maintenance Spares

312. The Petitioner has claimed maintenance spares in working capital as under:

Order in Petition No. 408/GT/2020 Page 167 of 178

 (Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
5443.00 5644.00 6085.00 6166.00 6429.00

313. Regulation 34(1)(a)(iv) of the 2019 Tariff Regulations provide for maintenance

spares @ 20% of the O&M expenses, including water charges and security

expenses. Accordingly, maintenance spares towards Working Capital are allowed

as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
5274.74 5492.77 5722.21 5963.45 6216.46

Receivables

314. Regulation 34(1)(a)(iv) of the 2019 Tariff Regulations provide for Working

Capital towards Receivables equivalent to 45 days of capacity charges and energy

charges for sale of electricity calculated on the normative annual plant availability

factor. Accordingly, Receivables equivalent to 45 days of capacity charges and

energy charges is worked out as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Receivables equivalent to 45 12427.67 13037.68 13544.78 13387.75 13244.30
days of capacity charges
Receivables equivalent to 45 25582.51 25582.51 25582.51 25582.51 25582.51
days of energy charge

O & M Expenses (1 month)

315. O&M expenses for 1 month as claimed by the Petitioner for the purpose of

working capital ise as under:

(Rs. in lakh)
2019-20 2020-2021 2021-22 2022-23 2023-24
2267.70 2351.80 2535.50 2569.20 2678.80

316. Regulation 34(a)(vi) of the 2019 Tariff Regulations provides for Working

Capital towards O&M expenses including water charges and security expenses for

Order in Petition No. 408/GT/2020 Page 168 of 178

 one month of O&M expenses for coal-based generating station. Accordingly, O&M

expenses (1 month) is allowed as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
2197.81 2288.65 2384.26 2484.77 2590.19

Rate of Interest on Working Capital

317. Regulation 34(3) of 2019 Tariff Regulations provides as below:

“(3) Rate of interest on working capital shall be on normative basis and shall be
considered as the bank rate as on 1.4.2019 or as on 1st April of the year during the
tariff period 2019-24 in which the generating station or a unit thereof or the
transmission system including communication system or element thereof, as the case
may be, is declared under commercial operation, whichever is later:
Provided that in case of truing-up, the rate of interest on working capital shall be
considered at bank rate as on 1st April of each of the financial year during the tariff
period 2019-24.”

318. In line with the Regulation 34(3) of the 2019 Tariff Regulations, the rate of

interest on working capital for 2019-20 is 12.05% (i.e. 1 year SBI MCLR of 8.55% as

on 1.4.2019 + 350 bps) and for 2020-21 is 11.25% (i.e. 1 year SBI MCLR of 7.75%

as on 1.4.2020 + 350 bps). However, since tariff of the generating station is being

determined by this order during the year 2021-22, the SBI MCLR as on 1.4.2021

(7.00%) is also available, which is lower in comparison to the same as on 1.4.2020

(7.75%). Since, the rate of interest on working capital is subject to truing-up, based

on the bank rate as on 1st April of each financial year, we consider it prudent to allow

the rate of interest as on 1.4.2021 for the subsequent financial years. Accordingly,

the rate of interest considered is 12.05% for 2019-20, 11.25% for 2020-21 and for the

subsequent years of the tariff period, the rate of interest of 10.50% (i.e. 1 year SBI

MCLR of 7.00% as on 1.4.2021 + 350 bps) has been considered. Necessary

computations in support of interest on working capital are as below:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Working Capital for Cost of 11266.15 11266.15 11266.15 11266.15 11266.15
coal towards stock (20 days
of generation at NAPAF)

Order in Petition No. 408/GT/2020 Page 169 of 178

Working Capital for cost of 16899.22 16899.22 16899.22 16899.22 16899.22
coal towards generation (30
days of generation at NAPAF)
Working Capital for Cost of 315.50 314.64 314.64 314.64 315.50
secondary fuel oil for two
months
Working Capital for 5274.74 5492.77 5722.21 5963.45 6216.46
Maintenance spares @ 20%
of O&M expenses
Working Capital for 12427.67 13037.68 13544.78 13387.75 13244.30
Receivables equivalent to 45
days of capacity charges on
the NAPAF
Working Capital for 25582.51 25582.51 25582.51 25582.51 25582.51
Receivables equivalent to 45
days of energy charges on
the NAPAF
Working Capital for O&M 2197.81 2288.65 2384.26 2484.77 2590.19
expenses (one month of O&M
expenses)
Total Working Capital 73963.61 74881.62 75713.77 75898.49 76114.33
Rate of Interest on Working 12.05% 11.25% 10.50% 10.50% 10.50%
Capital
Interest on Working Capital 8912.61 8424.18 7949.95 7969.34 7992.01

Additional Tax on Income due to adoption of Indian Accounting Standards

(‘Ind AS’)

319. In addition to the components of the annual fixed charges allowed under the

regulations, viz; Return on equity, Interest on normative loan, Depreciation, interest

on working capital and O&M expenses, the petitioner has also claimed additional tax

arisen on account of amendments in the Finance Act, 2017 to be recovered

separately over and above the annual fixed charges as per the change in law

provisions. The additional tax amount claimed by the Petitioner is Rs.38.28 lakh

each for the years 2019-20 and 2020-21 respectively.

320. The matter has been examined. As regards the recovery of additional tax

liability due to implementation of Ind AS, it is observed that the 2019 Tariff

Regulations provide for tax recovery by way of grossing up of Return on Equity

(ROE) with effective tax rate; or the Minimum Alternate Tax (MAT) in case of a

generating company or transmission licensee, as the case may be, paying MAT, of

Order in Petition No. 408/GT/2020 Page 170 of 178

the respective financial year. Further, no income, other than generation/ transmission

activities, is considered for the purpose of tax recovery. In the present case, ROE is

allowed for grossing up with MAT rate, as envisaged under the 2019 Tariff

Regulations. It is further observed that the implementation of Ind AS has an

accounting treatment implication and does not result in income from generation

business activity. Similar claim of the Petitioner for the 2014-19 tariff period has been

disallowed in this order. Accordingly, the prayer of the Petitioner for the 2019-24 tariff

period, to allow the recovery of additional tax liability on increased income due to

implementation of Ind AS is not allowed.

Annual Fixed Charges

321. Accordingly, the annual fixed charges approved for the generating station for

the 2019-24 tariff period are summarized as under:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
Return on Equity 27109.00 29153.01 31044.64 31005.56 30994.24
Interest on Loan 14094.35 14216.55 14014.45 11573.71 9133.87
Depreciation 24588.73 26492.50 28243.13 28223.66 28223.56
O & M Expenses 26373.72 27463.83 28611.06 29817.26 31082.31
Interest on Working 8912.61 8424.18 7949.95 7969.34 7992.01
Capital
Annual Fixed Charges 101078.41 105750.08 109863.23 108589.54 107425.98
Note: (1) All figures are on annualised basis. (2) All figures under each head have been rounded. The figure in total column in
each year is also rounded. As such the sum of individual items may not be equal to the arithmetic total of the column.

322. As stated in paragraph 294 above, the Ash disposal expenses allowed are as

below:

(Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24 Total
3425.52 3416.16 3416.16 3416.16 3425.52 17099.52

323. The annual fixed charges determined as above are subject to truing-up in

terms of Regulation 13 of the 2019 Tariff Regulations.

Energy Charge Rate (ECR)

Order in Petition No. 408/GT/2020 Page 171 of 178

324. As stated above, the Petitioner has claimed Energy Charge Rate (ECR) of

281.01 paise/kWh based on the weighted average price, GCV of coal & Oil procured

and burnt for the preceding three months i.e. October 2018 to December 2018. The

Petitioner did not subtract 85 kCal/kg from Weighted Average Gross calorific value

of coal as received, on account of variation during storage at generating station,

provided in Regulation 43(2)(b) of the 2019 Tariff Regulations, while computing the

IWC and the energy charge rate. The Commission has adjusted the same in

accordance with the Regulation 43(2)(b) of 2019 tariff regulations. ECR worked out,

based on the operational norms specified under the 2019 Tariff Regulations and on

‘as received’ GCV of coal for the preceding 3 months i.e. October 2018 to December

2018, is given below:

Description Unit 2019-24

Capacity MW 1050
Gross Station Heat Rate Kcal/kWh 2326.03
Aux. Energy Consumption % 6.25
Weighted average GCV of oil Kcal/lit 9100
Weighted average GCV of Coal * Kcal/kg 3999.16
(4084.16 - 85)
Weighted average price of oil Rs/KL 48292.22
Weighted average price of Coal Rs/MT 4530.33
Rate of energy charge ex-bus Rs/kWh 2.831

325. The Fuel component and Energy charges allowed in working capital are as

under:

(Rs. in lakh)
Year 2019-20 and 2023-24 2020-21 to 2022-23
Cost of Coal for stock (20 days) 11266.15 11266.15
Cost of Coal for Generation (30 days) 16899.22 16899.22
Cost of Secondary fuel oil 2 months 315.50 314.64
Energy charges for 45 days 25582.51 25582.51

326. There is variation between the Coal cost, Secondary fuel oil cost and Energy

charges considered and allowed as above towards Interest on Working Capital as

against those claimed by the Petitioner. This is attributable to the variation between

the values of SHR, GCV and the Cost of coal and Secondary fuel claimed by the

Order in Petition No. 408/GT/2020 Page 172 of 178

Petitioner and considered and allowed by the Commission. As regards the variation

in the Secondary fuel oil, the price and GCV of HFO only (as per consistent

methodology adopted) has been considered after excluding the quantity in stock,

while the Petitioner had considered the combined cost and GCV of LDO and HFO,

including the stock. Similarly, the GCV and landed price of coal, has been arrived at

after excluding the stock of coal, whereas, the Petitioner had included the stock of

coal. The fuel quantity in stock has been excluded to arrive at the exact value of

landed price and GCV of fuel procured during the three months from October 2018

to December 2018, as stipulated under the 2019 Tariff Regulations.

327. The Petitioner, on a month to month basis, shall compute and claim Energy

Charges from the beneficiaries based on the formulae given under Regulation 43 of

the 2019 Tariff Regulations.

Application Filing Fees and Publication Expenses

328. The Petitioner has also sought reimbursement of fees paid by it for the 2019-

24 tariff period for filing the tariff petition and the publication expenses incurred for

the same. The Petitioner shall be entitled for reimbursement of the filing fees and

publication expenses in connection with the present petition, directly from the

beneficiaries on pro-rata basis in accordance with Regulation 70(1) of the 2019 Tariff

Regulations.

Summary

329. The annual fixed charges allowed for the 2014-19 tariff period (after truing-up)

is as under:

(Rs. in lakh)
2014-15 2015-16 2016-17 2017-18 2018-19
103521.74 104906.37 103399.96 100487.66 99726.57

330. The annual fixed charges approved for the 2019-24 tariff period is as under:

Order in Petition No. 408/GT/2020 Page 173 of 178

 (Rs. in lakh)
2019-20 2020-21 2021-22 2022-23 2023-24
101078.41 105750.08 109863.23 108589.54 107425.98

331. Petition No. 408/GT/2020 is disposed of in terms of the above.

Sd/- Sd/- Sd/-

(Arun Goyal) (I.S. Jha) (P.K. Pujari)
Member Member Chairperson

Order in Petition No. 408/GT/2020 Page 174 of 178

CERC Website S. No. 11/2022
 Annexure – I

Weighted average rate of depreciation for the 2014-19 tariff period

Name of Dep.
Depreciation Gross Depreciation Gross Depreciation Gross Depreciation Gross Depreciation Gross
Sr. Amount
the Assets rates as per Block amount for Block amount for Block amount for Block amount for Block
No. for 2018-
Regulations 2014-15 2014-15 2015-16 2015-16 2016-17 2016-17 2017-18 2017-18 2018-19
19

Land under
A full 0.00% 8635.47 0 17305.94 0 17340.93 0 17341.33 0 17427.03 0
ownership

Land under
B
lease

for
(a) investment in 3.34% 6068.48 202.69 8004.12 267.34 7936.78 265.09 7936.78 265.09 8907.31 297.5
the land

Assets
C purchased
new

Pl &
Machinery in
a.
generating
stations

Steam
electric
NHRB &
(i) 5.28% 372736.3 19680.48 376462.2 19877.21 380837 20108.19 382079.1 20173.77 389131.9 20546.17
waste heat
recovery
boilers

Order in Petition No. 408/GT/2020 Page 175 of 178

 Cooling
towers &
b. circulating 5.28% 10070.52 531.72 10070.52 531.72 10070.52 531.72 10070.52 531.72 10070.52 531.72
water
systems

Building &
Civil
d.
Engineering
works

Offices and
(i) 3.34% 2711.34 90.56 2811.1 93.89 2812.63 93.94 2909.02 97.16 10399.72 347.35
showrooms

Containing
thermo-
(ii) electric 3.34% 20269.2 676.99 23623.96 789.04 24300.49 811.64 24311.59 812.01 24333.73 812.75
generating
plant

Containing
hydro-
(iii) electric 3.34% 0.00 0 263.44 8.8 526.88 17.6 526.88 17.6 263.44 8.8
generating
plant

Roads other
(v) than Kutcha 3.34% 2920.61 97.55 5064.62 169.16 5366.43 179.24 5436.96 181.59 2738 91.45
roads

(vi) Others 3.34% 15021.06 501.7 17794.86 594.35 20042.28 669.41 20230.55 675.7 10558.2 352.64

Transformers, Kiosk, sub-

station equipment & other
e. fixed

apparatus (including plant)

Order in Petition No. 408/GT/2020 Page 176 of 178

 Transformers
including
foundations
(i) having rating 5.28% 5485.01 289.61 5499.34 290.37 5513.68 291.12 5513.68 291.12 5611.47 296.29
of 100

KVA and
over

Switchgear
including
f. 5.28% 13204.1 697.18 13220.88 698.06 13270.68 700.69 13270.68 700.69 13407.67 707.93
cable
connections

Lines on
steel on
(iii) reinforced 5.28% 0.00 0 1.73 0.09 3.47 0.18 1.73 0.09 0 0
concrete
support
Self-
k. propelled 9.50% 287.41 27.3 274.95 26.12 268.7 25.53 298.91 28.4 304.54 28.93
vehicles
(ii) Portable 9.50% 10.18 0.97 10.18 0.97 10.18 0.97 10.18 0.97 8.01 0.76

m. Office
furniture and 6.33% 679.29 43 770.74 48.79 793.91 50.25 770.89 48.8 764.54 48.4
furnishing
(i)

Office
(ii) 6.33% 584.44 37 652.13 41.28 685.24 43.38 684.06 43.3 683.58 43.27
equipment

Internal
wiring
(iii) including 6.33% 588.41 37.25 578.59 36.62 579.64 36.69 579.64 36.69 579.64 36.69
fittings and
apparatus

Order in Petition No. 408/GT/2020 Page 177 of 178

 Strret Light
(iv) 5.28% 64.03 3.38 64.03 3.38 64.03 3.38 32.02 1.69 0.00 0
fiitings

Telephone
(ii) lines and 6.33% 8.03 0.51 13.51 0.86 15.93 1.01 16.2 1.03 13.19 0.84
telephones

I. T
Equipment
p. 15.00% 246.44 36.97 265.7 39.86 252.74 37.91 255.11 38.27 291.12 43.67
including
software

Any other
assets not
q. 5.28% 387.17 20.44 388.38 20.51 388.59 20.52 382 20.17 386.19 20.39
covered
above

TOTAL 451342 22975.28 465835 23538.4 473739.8 23888.46 475316.5 23965.86 478452.8 24215.54

Weighted
Average
5.09% 5.05% 5.04% 5.04% 5.06%
rate of
depreciation

Order in Petition No. 408/GT/2020 Page 178 of 178